On July 11, 2016 the Inland Revenue Authority of Singapore published the first edition of an IRAS e-Tax Guide titled: “Income Tax: The General Anti-avoidance Provision and its Application”. According to the e-Tax Guide the e-Tax Guide is issued with two objectives:

(i)     First, it sets out the Comptroller of Income Tax’s (“CIT”) approach to the construction of the general anti-avoidance provision in section 33 of the Income Tax Act (“ITA”); and

(ii)   Second, it provides some examples on arrangements, which in CIT’s view, have the purpose or effect of tax avoidance within the meaning of section 33(1) of the ITA. By providing the examples, this e-Tax Guide aims to deter taxpayers from entering into such arrangements. Such arrangements will be subject to the wide powers of the CIT under section 33(1).

In the Paragraph 2 (At a glance) the e-Tax Guide provides the following high-level summary:

“With respect to the construction of section 33 of the ITA, CIT adopts an approach based on the principles enunciated by the Court of Appeal (“CA”) in the case of CIT v AQQ [2014] SGCA 15 (“AQQ case”). The CA held at [110] that the “scheme and purpose approach” ought to be adopted with respect to the interpretation of section 33. The scheme and purpose approach is as follows:

(i)     consider whether an arrangement prima facie falls within any of the three threshold limbs of section 33(1) such that the taxpayer has derived a tax advantage; and if so,

(ii)   consider whether the taxpayer may avail himself of the statutory exception under section 33(3)(b); and if not,

(iii)  ascertain whether the taxpayer has satisfied the court that the tax advantage obtained arose from the use of a specific provision in the Act that was within the intended scope and Parliament’s contemplation and purpose, both as a matter of legal form and economic reality within the context of the entire arrangement.

The examples of arrangements (as well as their key features) that CIT would regard as having the purpose or effect of tax avoidance within the meaning of section 33(1) of the ITA may be classified into the following broad groups:

(i)     Circular flow or round-tripping of funds;

(ii)    Setting-up of more than one entity for the sole purpose of obtaining tax advantage;

(iii)   Change in business form for the sole purpose of obtaining tax advantage; and

(iv)  Attribution of income that is not aligned with economic reality.”

Click here to be forwarded to the the first edition of an IRAS e-Tax Guide titled: “Income Tax: The General Anti-avoidance Provision and its Application” as published on July 11, 2016 by the Inland Revenue Authority of Singapore.

Copyright – internationaltaxplaza.info

Follow International Tax Plaza on Twitter (@IntTaxPlaza)

and

Follow International Tax Plaza on Facebook