An IRAS tax investigation is a criminal investigation into suspected tax evasion or fraud, run by IRAS’s Investigation and Forensics Division. It often starts with a surprise visit to your business premises, and sometimes your home and your tax agent’s office at the same time. Officers can take records and computer data, interview you, your family, staff and suppliers, and arrest people suspected of serious tax fraud. IRAS says investigations usually take 15 to 24 months and end in prosecution, composition, a warning or no further action. If officers arrive, cooperate, do not obstruct them, and contact a lawyer.
Audit or investigation: what is the difference?
| Audit | Investigation | |
|---|---|---|
| Purpose | Check that returns are correct and recover tax | Establish whether a tax offence was committed, with a view to prosecution |
| How it starts | Usually a letter or email asking for documents | Often an unannounced visit by investigators carrying authority cards |
| Typical outcome | Additional assessment and penalties | Prosecution, composition, warning or no further action, plus the tax |
An audit can turn into an investigation if officers find signs of deliberate evasion. For audits, see our guide to preparing for an IRAS tax audit.
What investigators can do
IRAS’s investigation guidance describes the following:
- Surprise visits to business premises, and at the same time to your home, your tax agent’s office and relevant third parties.
- Access and search. Section 65B of the Income Tax Act 1947 and section 84 of the GST Act 1993 give officers full and free access to premises, records, data and documents. People found on the premises may be searched for evidence.
- Taking records and data. Officers may copy or take books and documents, download information from electronic storage and take possession of computers.
- Interviews with you, family members, staff, your tax agent, suppliers and others.
- Third-party information from government agencies, banks, financial institutions and foreign tax authorities.
- Arrest of individuals suspected of serious tax fraud or who obstruct the seizure of evidence. A person arrested can be held for up to 48 hours before being charged in court or released on bail.
Investigators identify themselves with authority cards and give a letter stating the purpose of the visit. IRAS says you can confirm an officer’s identity by calling 6351 2044 or 6351 2046.
What you must and must not do
- Do not obstruct. Hindering or obstructing officers is an offence, punishable by a fine of up to S$10,000, up to 12 months’ imprisonment, or both.
- Do not give false answers. Giving false answers to IRAS with intent to evade tax, or to help someone else evade it, can lead to a penalty of three times the tax undercharged, a fine of up to S$10,000 and/or up to seven years’ imprisonment.
- Keep all records. Records must be kept for at least five years. Failing to keep them is an offence in itself.
- Get a lawyer involved early. Contact a lawyer as soon as you can, and tell the officers you intend to. Answer truthfully, and do not guess at figures you do not know.
- Brief your staff. Tell them to cooperate, not to destroy or move anything, and not to discuss the matter with each other in a way that looks like aligning stories.
How long it takes and how it ends
IRAS says investigations normally take about 15 to 24 months, depending on scope, complexity and cooperation. Before closing, IRAS usually meets the taxpayer to discuss its findings and gives an opportunity to explain irregularities. There are four possible outcomes:
- Prosecution where IRAS has a prima facie case that offences were committed.
- Composition: an offer to pay a sum in lieu of prosecution, which can be up to 400% of the additional tax depending on severity.
- Stern or conditional warning instead of prosecution.
- No further action where there is no evidence of wrongdoing, after any tax adjustments.
Serious fraudulent evasion carries a penalty of up to four times the tax undercharged, a fine of up to S$50,000 and/or up to seven years’ imprisonment. IRAS also states that the usual time limits for raising assessments do not apply where there is fraud. Your conduct and cooperation during the investigation are taken into account in deciding the outcome.
How Raffles Corporate Services and the lawyers work together
An investigation needs both legal and accounting work. A lawyer from a firm on our panel advises on rights, interviews, statements, any charge and negotiations on composition. We support the lawyer and the company by:
- indexing what was taken and obtaining copies so the business can keep operating and filing
- reconstructing the true income and GST position from bank records and source documents
- preparing schedules that explain legitimate differences, such as personal receipts or non-taxable income
- keeping ongoing GST, tax and annual filings up to date during the investigation
- putting proper accounting controls in place, which matters to how the case is viewed
If charges follow an investigation, the company or its officers can ask the prosecution to reconsider. See letters of representation for companies and directors.
Frequently asked questions
Can we still make a voluntary disclosure once an investigation has started?
Not for matters within the scope of the investigation. Unrelated errors may still qualify. Full and early cooperation is still taken into account. See our guide to voluntary disclosure of tax evasion for the position before IRAS acts.
Will the bank know?
Possibly. IRAS says that when it seeks information from banks in an investigation, it must tell them it relates to a criminal offence.
Can the company keep trading?
Usually yes, but it must keep filing returns on time and paying tax due. Ask for copies of records you need to operate.
If you received a letter inviting you to come forward rather than a visit, read our guide to the IRAS Voluntary Disclosure Opportunity letter. More guides on the tax and GST hub.
Is your company under IRAS investigation?
If your company, or you as a director or shareholder, is dealing with an IRAS investigation, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the documents and deadlines and rebuild the accounts. Where your matter needs a lawyer, we will refer you to a firm on our panel of Singapore law firms that regularly handles tax investigations and prosecutions. Raffles Corporate Services is a corporate services provider, not a law firm, and this article is general information, not legal advice.
Kevin Yeo, Raffles Corporate Services