TAKEAWAYS
The ISCA Ethics Committee (EC) develops the ISCA Code of Professional Conduct and Ethics (EP 100). As part of outreach efforts to raise awareness, the ISCA EC collaborated with the tax experts who wrote this three-part article to shed light on the adoption of the tax planning standards in EP 100 (revised on 20 March 2025).
Tax controversies around the world have led to growing public scrutiny of tax planning and the role played by providers of tax planning services. Questions have been raised regarding the expected ethical and professional behaviour when accountants are involved in developing tax minimisation strategies that are perceived as “aggressive”.
In response to public concerns about tax avoidance and the role played by providers of tax planning services, the Tax Planning Standards issued by the International Ethics Standards Board for Accountants (IESBA) provide a principles-based framework and a global ethical benchmark applicable to tax planning services and activities. IESBA’s Tax Planning Standards establish a consistent point of reference for accountants, as well as other tax professionals, who are strongly encouraged to use these standards when dealing with tax planning, to ensure due consideration of public interest as well as potential reputational, commercial and wider economic consequences for their clients or employing organisations.
In Singapore, the ISCA Code of Professional Conduct and Ethics (EP 100) establishes ethical requirements for ISCA members and is modelled after the IESBA Code. EP 100 (revised on 20 March 2025) has adopted IESBA’s Tax Planning Standards and contains new Sections 280 and 380 to address tax planning and related services with an expected effective date of 1 July 2025.
In this article, we will look at tax planning arrangements that are regarded as legitimate, where the taxpayer is doing no more than what the policymakers contemplated, in taking a lawful advantage of an exemption or relief provided for in the tax statute.
The Supplementary Retirement Scheme (SRS) is a policy initiative of the Singapore government to encourage saving for retirement. Under SRS, where a taxpayer makes a monetary contribution towards SRS, he may claim a deduction under section 39(2)(o) of the Income Tax Act 1947 (ITA), against his income.
For instance, a taxpayer who is a Singapore citizen or permanent resident, at the highest marginal tax rate of 24%, would benefit from a tax saving of $3,672 when he makes the maximum contribution of $15,300 into his SRS account. Many taxpayers do take advantage of the tax savings offered by the government. It cannot then be said that the taxpayers making contributions into their SRS accounts are indulging in tax avoidance.
In this regard, Chief Justice Sundaresh Menon, in delivering the judgement of the Court of Appeal in Comptroller of Income Tax v AQQ and another appeal [2014] SGCA 15 (AQQ)1, said, “An arrangement should not be construed as having the purpose and effect of, for example, reducing or avoiding liability imposed by the Act within the meaning of s 33(1) [of the ITA] if the arrangement results in a tax effect or advantage that is in fact contemplated by the use of the specific provision in the Act; there is thus, in a legal sense, no reduction or avoidance of liability that would otherwise have been imposed by the Act.”
Similarly, when estate duty was in force in Singapore (in respect of deaths before 5 February 2008), there was a tax exemption of up to $9 million for residential properties owned by the deceased. A person who purchased residential properties to take advantage of the tax shelter offered by the Estate Duty Act could not be said to be indulging in tax avoidance, and professional advisers frequently advised their clients of such tax exemption.2
The legislature has nevertheless enacted general anti-avoidance statutory provisions (“GAAR” for general anti-avoidance rule) in the main tax statutes to deal with tax arrangements which may not be considered to be within the “scheme and purpose” of those statutes. The GAAR in the ITA empowers the Comptroller of Income Tax to disregard any arrangement where the purpose or effect is to: (1) alter the incidence of tax, (2) relieve any person from liability to pay tax, or (3) reduce or avoid any liability to pay tax. Where the Comptroller of Income Tax disregards such arrangements for tax purposes, he may vary the arrangement and make such adjustments as appropriate, to counter the advantage. As may be seen, the scope of the statutory provisions is very wide.
Nevertheless, the GAAR cannot be read so widely as to nullify all the tax incentives (whether exemptions, relief or reduced tax) offered by the tax statutes. Otherwise, the government will never be able to use any tax relief or exemption to incentivise any activity. Where the tax advantage is within the scheme and purpose of the tax statute, the GAAR will not be applicable, as “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”.3
In the SRS example, even if the taxpayer were to admit that one of his main purposes of contributing to the SRS was to reduce tax, the GAAR is not to be used. This is because such a reduction of tax is within the scheme and purpose of the ITA.
Similarly, where the taxpayer has deliberately kept his foreign-sourced income outside Singapore, the GAAR is not to be invoked, as the scheme and purpose of the ITA contemplates the situation where foreign-sourced income is only to be taxed where remitted to Singapore under section 10(1) of the ITA.4
Professional accountants are expected to play an important role in tax planning while complying with tax laws and regulations. In playing such a role, they ought to be conversant with the existing legislation and regulations concerning tax evasion and tax avoidance (which although not illegal, may be regarded as abusive exploitation of loopholes in the system and attract counter actions by the tax authority).
Parts 2 and 3 of the article will shed light on the concepts of “tax evasion” and “tax avoidance”. Part 2 will discuss what tax evasion is, and how tax drives behaviour. Part 3 will use the “99-to-1” stamp duty and personal service company cases to illustrate the concept of tax avoidance.
Tay Hong Beng, CA (Singapore), is a member of the Board of Directors of Singapore Chartered Tax Professionals (SCTP), and a former Partner and Head of Tax, KPMG Singapore. Leung Yew Kwong is Principal Tax Advisor, KPMG Singapore.
1At [108] of AQQ
2 In a similar vein, a professional accountant complying with EP 100 (revised on 20 March 2025) shall advise or recommend a tax planning arrangement to a client only if he has determined that there is a credible basis in laws and regulations for the arrangement.
3At [110] of AQQ
4See paragraph 7.1 of IRAS e-Tax Guide: Income Tax: The General Anti-Avoidance Provision and its Application (Second Edition, 31 March 2023)
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