The principal activities of SFRS are the manufacturing of pressure vessels and steel structures for use on ships.

Modus Operandi

Investigations revealed that SFRS set up 6 related companies in late December 2004 to abuse the tax exemption scheme for new companies under section 43(6A) of the Income Tax Act.
Investigations also revealed that there was no work or services performed by the 6 related companies for SFRS. The 6 shell companies had no employees except for the SFRS directors themselves. Nevertheless, SFRS included fictitious expenses amounting to $1,622,000 in its audited statements of accounts for the years 2004 to 2006. These comprised commission fees, technical consultancy fees, marketing consultancy fees, engineering consultancy fees and management fees. The said fees were for the work and services purportedly performed by the 6 shell companies. SFRS consequently under-reported its profits by the same amount of $1,622,000 in its income tax returns for the Years of Assessment 2005 to 2007.
Although the 6 related companies had reported the various fees as their income, each company paid a negligible amount of tax as the first $100,000 of their chargeable income was exempted from tax under the tax exemption scheme. Therefore, SFRS had abused the tax exemption scheme and used these 6 shell companies to lower its own tax liability.

The tax exemption scheme under section 43(6A) of the Income Tax Act, which took effect from Year of Assessment 2005, was introduced to support entrepreneurship and encourage growth of local enterprises. Newly incorporated companies can enjoy a tax exemption on the first $100,000 of normal chargeable income (excluding Singapore dividends) for the first 3 consecutive Years of Assessment from the year of incorporation. Starting from Year of Assessment 2008, newly incorporated companies can claim a further 50% exemption on the next $200,000 of normal chargeable income (excluding Singapore dividends).
The company’s managing director, Mr Gan Oh Boon assisted the company to evade tax and authorised the abuse of the tax exemption scheme.

An Errant Tax Agent’s Involvement

Investigations revealed that SFRS’ auditor, Mr Chng Chor Tong, had advised Mr Gan Oh Boon to set up new companies and charge expenses in the books of accounts of SFRS in order to make use of this tax exemption scheme. Mr Chng Chor Tong and his sole proprietorship, CT Chng & Co., was involved in the entire process of SFRS’ tax evasion – registering the 6 companies, preparing the management agreements between SFRS and the companies, creating invoices to support the fictitious expenses and making audit journal adjustments to post these expenses to the final audited statements of SFRS’ accounts.

Mr Chng Chor Tong was the first practicing certified public accountant in Singapore to be convicted of tax evasion. He was convicted on 28 April 2009 of evading tax on his income from his sole-proprietorship, CT Chng & Co, and was sentenced to 6 month’s jail and ordered to pay a penalty of $75,200.52. In addition, he paid $200,000 for compounding his offence of abetting one of his clients in the commission of a tax offence.

Omission of Benefits-in-kind

Investigations also revealed that SFRS’ managing director, Mr Gan Oh Boon had omitted employment income in the form of benefits-in-kind, made up of hire-purchase instalments for his private car and his other private expenses paid for by SFRS.

Mr Gan Oh Boon was convicted of negligently making incorrect returns by omitting benefits-in-kind amounting to $405,335 for the Years of Assessment 2004 to 2006. SFRS was also convicted of negligently giving incorrect information about Mr Gan Oh Boon’s tax liability by omitting the said benefits-in-kind from his Form IR8A for the same Years of Assessment.

Court Sentences for SFRS and Mr Gan Oh Boon

SFRS and Mr Gan Oh Boon were first charged in court on 16th January 2009 for 10 charges each. This morning, SFRS pleaded guilty to 2 charges under section 96(1)(b) and 3 charges under section 95(2)(b), and Mr Gan Oh Boon pleaded guilty to 2 charges under section 96(1)(b) and 3 charges under section 95(2)(a). The remaining charges were taken into consideration for sentencing. For the 5 charges, the Court

i) Sentenced SFRS to a fine of $24,000 and ordered it to pay a penalty of $988,933.58.
ii) Sentenced Mr Gan Oh Boon to a total of 2 weeks of imprisonment and a total fine of $8,000. In default of payment of the fine, the default sentence would be 6 weeks of imprisonment. He was also ordered to pay a total penalty of $988,933.58. In default of payment of penalty, the total default sentence would be 34 months of imprisonment.

Voluntary Disclosure

Taxpayers are encouraged to conduct periodic reviews of their income tax returns/declarations and disclose any error voluntarily. While IRAS believes the majority of taxpayers are compliant, some taxpayers could have been negligent or unaware of their tax obligations, thus resulting in mistakes.

Preparing the Annual financial statement is a tedious task which needs meticulous processing of records of financial transactions. At Rikvin our experts can minimize the pressure on your in-house resources by helping you in

• selecting and applying suitable accounting policies
• preparing financial statements in line with the International accounting standards
• presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information
• providing additional disclosures to enable clear understanding of transactions, other events and conditions on the entity’s financial position and financial performance

Companies are legally obliged to include a Directors Report in their annual financial statement. The report must give a fair review of the company’s financial and operational results and condition and also include additional information such as dividend recommendation, reserved earnings, details of directors and their interest, principal risks and uncertainties etc.

Directors Report is an important communication medium for a company to interact with various interest groups such as investors, creditors, government bodies, business analysts etc. Therefore it is essential to ensure that the report includes all the relevant information succinctly yet without any ambiguity. Rikvin can help you draft a Directors Report that is fairly simplified yet comprehensive in addressing the key elements.

The upcoming offerings are aimed at helping companies boost productivity and devise better ways to do business to bolster Singapore's efforts to transform and grow its economy.

Singapore Prime Minister made the promise on Tuesday when he also said that companies which spur job creation over the medium to longer term will be rewarded.

He did not elaborate on the new incentives in his 45-minute speech at a labour movement conference, but identified broadly the critical steps that needed to be taken for Singapore's post-recession economy.

"We have to pursue higher productivity and build better capability, and move workers from less competitive businesses into newer, expanding ones."

The signing took place in Singapore between Mr Moses Lee, Commissioner of Inland Revenue, and His Excellency Mr Martin Harvey, New Zealand’s High Commissioner to Singapore.

In March 2009, Singapore endorsed the new internationally agreed Standard for exchange of information which will enhance bilateral cooperation in information exchange upon request for tax matters. Since then, we have been renegotiating existing DTAs and negotiating new DTAs with numerous jurisdictions, including OECD countries. Several of these have progressed sufficiently with the agreements expected to be formally signed within the next few months, with some of these already initialled before formal signature.

The revised DTA between Singapore and New Zealand will also minimise the double taxation of income that may occur as a result of cross-border economic activities between both countries, thus promoting bilateral trade and investment. Other key changes under the revised DTA include the following:

a) Lower withholding tax rates for dividends, interest and royalties, which are 15% under the existing DTA. The new withholding tax rates for interest and royalties are 10% and 5% respectively, while the withholding tax rates for dividends are 5% or 15%, depending on the shareholding structure; and

b) Change to the definition of a Permanent Establishment to incorporate a building site, a construction, installation or assembly project if it lasts more than 12 months, instead of six months in the existing DTA.

The Agreement, which is Singapore’s 60th agreement for the avoidance of double taxation, encourages and facilitates cross-border trade and investment between Singapore and Russia through the lowering of tax barriers and the better definition of taxing rights between the two nations. The main provisions under the Agreement include the following:

A) Lower withholding tax rates are imposed on dividends, interest and royalties. The tax rate for interest and royalties is 7.5% while the following rates apply to dividends:

1. 5% (for corporate shareholders holding at least 15% of the share capital and has invested at least US$100,000 or its equivalent in other currencies);
2. 5% for the Government; and
3. 10% (for other shareholders)

B) Tax credit would be available for residents earning foreign-sourced income. In the case of dividends received from Russia, Singapore also allows tax credit on the underlying tax paid for the dividends (i.e. tax credit on the corporate tax on the profits out of which the dividends are paid) if there is at least 10% shareholding.

C) A building site, a construction, installation or assembly project, or supervisory activities connected therewith constitute a permanent establishment only if it lasts more than 6 months. The period threshold for furnishing of services is more than 3 months in any 12-month period.

From 1 Jan 2009, companies will also be required to declare the estimate of the company's chargeable income for a Year of Assessment (YA).the revenue amount in the ECI Form. Where the audited accounts are not available, you can refer to the company’s management accounts for the purpose of declaring the revenue amount.

Who and when you need to File your ECI?

A company has to furnish Estimated Chargeable Income (ECI) within three months after the end of its financial year end, even if the company estimates its chargeable income as zero, it still has to file a “Nil” ECI return.

Fictionalized Client Profile - Call Private (Southeast Asia) Pte Ltd

Call Private (Southeast Asia) Pte Ltd is a company focusing on mobile communications privacy. Their Finnish HQ requires weekly numbers, segregated by country.

The regional head Mr. Valentin Särkkä chose to engage Rikvin’s Accounting Agent service. Under the arrangement Rikvin collects documents every Monday morning from the company’s office in Republic Plaza. By Wednesday morning draft accounting reports for the preceeding week are ready including Income Statement by country. Once every quarter, financial statements for the quarter are generated along with the Goods & Services Tax (GST) schedule. On Mr Särkkä's approval Rikvin submits the GST return to the Inland Revenue Authority of Singapore (IRAS) on behalf of the company .

As per the request of the company the documents are safe kept by Rikvin and at the end of the year handed over to the auditor along with the annual financial statements. Rikvin then works closely with the audit firm to answer queries that come up.

Contact us at (+65) 63034600 or info@rikvininternational.com to discuss your requirements with our friendly accountants.

Preparing Director Report (FRS), preparing of tax computations and
attending customer queries.

Requirements:

• Degree or professional qualification recognised by ICPAS
• Holding the equivalent position and proven at least 2 - 3 years
  experience in local professional firm.
• Managing tax functions including assisting in tax planning,
  identifying tax incentives and providing relevant advice to local and
  international clients.
• Possess Leadership & communication skills & have keen business
  awareness and good analytical skills.
• Meticulous in his/her work and eager to learn.

Only candidates who are looking for long term employment need to
apply.
5 day week

Email resume to: hr@rikvininternational.com

• Perform accurate data entry to computerized accounting system.
• Prepare full set of accounts and bank reconciliation.
• Prepare necessary accounting schedules : Fixed assets, prepayments, accruals, loan, hire purchase, etc.
• Other Ad-hoc duties or assignments.

Requirements:

• Financial accounting qualifications and experience is a must.
• Meticulous & Accurate in his/her work an especially with numbers.
• IT Savvy and knowledge of accounting software required.
• Open-minded, independent and bilingual (Mandarin) individual preferred.
• Able to start work immediately.
• Only those interested in long-term career need to apply.

Interested applicants, please send your updated detailed resume stating your current and expected salary to: hr@rikvininternational.com