First Prosecution Over Tax Avoidance Scheme
A mother and her son have been charged on Sept 20 with providing false information to the Inland Revenue Authority of Singapore (Iras) during an audit of the “99-to-1” property purchase arrangement. This marks the first prosecution related to the audit of the two-step scheme.
Details of the Charges
- Ng Chiew Yen, 56, and Keith Tan Kai Wen, 26, were each handed five charges under the Stamp Duties Act.
- The “99-to-1” scheme is a tax avoidance arrangement used by some property buyers to reduce the rightful Additional Buyer’s Stamp Duty (ABSD) payable on the purchase of a residential property.
- It allows individuals who already own property to reduce or avoid paying ABSD while still becoming the additional property’s co-owner and a co-applicant for a loan to finance the purchase.
Investigations and Allegations
Iras revealed that Tan had bought a residential property in his sole name on Sept 24, 2021, and later sold a one per cent share of the property to his mother. The audit into the “99-to-1” property transactions was conducted to uncover possible tax avoidance.
During the audit, Tan allegedly provided misleading information to Iras, including incomplete WhatsApp messages, and false responses concerning the property transactions.
Potential Penalties
If convicted of providing false and misleading information, Tan and Ng could each face fines of up to $10,000, imprisonment for up to two years, or both.
Analysis and Implications
The “99-to-1” property purchase arrangement is a method used to avoid paying the full amount of ABSD, resulting in potential tax avoidance. Iras is vigilant in auditing such transactions to ensure compliance with tax laws and prevent abuse of the system.
Key Points to Note:
- Individuals involved in property transactions should cooperate with Iras during audits and provide accurate information.
- Providing false statements or misleading information to Iras is considered a criminal offense with severe penalties.
- Tax avoidance schemes like “99-to-1” can lead to financial repercussions, including fines, imprisonment, and surcharges on the additional duty payable.
It is essential for individuals in the property market to understand the legal implications of tax avoidance and cooperate with tax authorities to ensure compliance with regulations.