Investment company and director fined for declaring incorrect directors' fees in tax returns

Investment company and director fined for declaring incorrect directors' fees in tax returns

IRAS building
Inland Revenue Authority of Singapore building. (Photo: Gaya Chandramohan)

SINGAPORE: An investment company's controlling director has been fined S$25,000 and ordered to pay a penalty of S$955,580 for declaring incorrect expenses of directors' fees in corporate income tax returns over more than 10 years.

Tan Hwa Luck was charged with giving incorrect information without any reasonable excuse in the tax returns of Hwa Luck Investments. This resulted a total tax undercharged of S$763,285 between 1995 and 2007, said the Inland Revenue Authority of Singapore (IRAS) on Monday (Jul 27). 

Hwa Luck Investments had declared in its corporate income tax returns that directors' fees amounting to a total of S$3,386,000 had been incurred as expenditures between 1995 and 2007.

During an IRAS audit, Tan had claimed that the directors' fees were paid out to four directors in two lump-sum payments in the financial year 2006 and 2009.

"To substantiate his claims, Dr Tan presented cheques, payment vouchers and bank statements to IRAS," said the tax authority.

However, investigations showed that the four directors did not receive any payment of directors' fees, and that the payee of the fees was Tan.

The money was eventually routed back into Hwa Luck Investment's corporate bank account.

The court also sentenced Hwa Luck investments to a fine of S$25,000 and a penalty of S$955,580, two times the amount of tax undercharged.

"Any business that gives incorrect information in its Income Tax Returns without reasonable excuse may be liable to a penalty that is twice the amount of tax undercharged," said IRAS, warning that a jail term may also be imposed.

Businesses or individuals are encouraged to immediately disclose any past tax mistakes, said IRAS, adding that such disclosures will be treated as mitigating factors when considering action to be taken.

Source: CNA/lk(gs)