IRAS issues first edition of the e-Tax Guide, “Income Tax: The general anti-avoidance provision and its application”

14 July 2016

On 11 July 2016, the Inland Revenue Authority of Singapore (IRAS) issued an e-Tax Guide, “Income Tax: The General Anti-avoidance Provision and its Application (1st ed).”

The e-Tax Guide 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 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.

Only tax avoidance arrangements within the meaning of section 33 of the ITA are addressed. Arrangements that form the subject of specific anti-avoidance provisions in the ITA, and/or involve the evasion of tax are not covered. However as the guidelines and accompanying examples in the Guide are not meant to be exhaustive, arrangements that are not described within the Guide should not be taken as falling outside the ambit of section 33(1) of the ITA, and acceptable to CIT.

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”) where the CA held at [110] that the “scheme and purpose approach” ought to be adopted with respect to the interpretation of section 33, i.e.:

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

  • Circular flow or round-tripping of funds
  • Setting-up of more than one entity for the sole purpose of obtaining tax advantage
  • Change in business form for the sole purpose of obtaining tax advantage, and
  • Attribution of income that is not aligned with economic reality.

Bona fide commercial transactions which are carried out not in pursuance of any tax avoidance arrangement will not come within the scope of section 33. Companies and individuals granted tax exemptions and concessions under specific tax provisions would not be affected by section 33, provided that no artificiality or contrivance exists to exploit the exemptions or concessions intended by the Parliament.

The e-Tax Guide provides guidance on the following areas:

  • Approach to the construction of section 33
  • Examples of tax avoidance arrangements
  • What section 33 is not targeted at
  • CIT’s powers under section 33

For further details, please refer to the IRAS’s website.

Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website. Visit for more information.