Revenue and Tax Law

AuthorTAN Kay Kheng LLB (Hons) (National University of Singapore); CDipAF (Association of Chartered Certified Accountants); MAcc (Charles Sturt University), MTax (University of New South Wales); CTA, FCPA (Australia), ATA (Income Tax), FSIArb; Advocate and Solicitor (Singapore). Leonard GOH MA (Cambridge); Advocate and Solicitor (Singapore); Legal Officer, Accounting and Corporate Regulatory Authority.
Date01 December 2012
Published date01 December 2012
Citation(2012) 13 SAL Ann Rev 420

23.1 The Supreme Court delivered six decisions in 2012 relating to tax law: two decisions dealing with income tax and the other four dealing with property tax. There were no cases dealing with stamp duty or goods and services tax.

23.2 The two income tax cases are significant for being the first pronouncements by our High Court on two important areas: s 33 of the Income Tax Act (Cap 134, 2008 Rev Ed) (‘ITA’) on tax avoidance, and s 105J of the ITA on an application by the Comptroller of Income Tax (‘Comptroller’) to the High Court for an order that a bank provide records and information on certain bank accounts under the provisions dealing with a request for the exchange of information by a foreign tax authority.

23.3 The four property tax cases add to the jurisprudence in this area of tax, which has seen a number of cases being decided by the High Court and Court of Appeal in recent years. In fact, appeals have been filed in the three High Court cases to the Court of Appeal, one of which was already decided upon by the Court of Appeal at the time of writing.

23.4 There are therefore, in our view, six cases for the year 2012 which had relevance to revenue law:

Tax Type

High Court

Court of Appeal

Income tax



Property tax



Income tax

Tax avoidance and interpretation of s 33 of the ITA

23.5 AQQ v Comptroller of Income Tax[2013] 1 SLR 1361 (‘AQQ’) is important as it is the first case reaching the Supreme Court that puts the interpretation of the general anti-avoidance provision (viz, s 33) of the ITA in issue, even though s 33 has been enacted since 1988.

23.6 The case involved a somewhat complex restructuring of a group of companies, held ultimately by a Malaysian holding company (‘B Holdco’). In 1967, B Holdco had entered into a joint venture with another company, R, where each party held a 50% equity interest in each of three companies in Singapore, ie, F, G and H. Subsequently, B Holdco acquired R's 50% equity interest. The resulting structure was that B Holdco's 100% interest in each of the three Singapore companies (F, G and H) became held indirectly, with 50% held through an intermediate holding company, D, and the other 50% held through another intermediate holding company, C. D is a Singapore company whereas C is a Malaysian company.

23.7 It was considered necessary to restructure and streamline the ‘cumbersome holding structure’ for the subsidiary companies ‘so as to reduce operational inefficiencies, reorganise the Subsidiaries according to their lines of businesses and let the Subsidiaries avail themselves of group relief’ (at [110]).

23.8 Briefly, the restructuring that took place involved the use of a new Singapore company, viz the taxpayer (‘AQQ’), wholly owned by B Holdco. Through a series of steps, the resulting structure post-restructuring was that D, F, G and H became direct and wholly—owned subsidiaries of AQQ. Further, C ceased to have any equity interest in D, F, G and H but remained wholly owned by B Holdco.

23.9 The restructuring also involved a financing arrangement where AQQ issued certain fixed rate convertible notes to the Singapore branch of N Bank and utilised the proceeds from the notes to acquire D, F, G and H. On the same date as the issue of the notes, the Singapore branch of N Bank detached and retained the interest coupons from the notes and sold the principal component of the notes to the bank's Mauritius branch. The Mauritius branch of N Bank in turn sold the principal component of the notes to C, also on the same date. C was put in funds, again on the same date, with loans from B Holdco and D respectively. The facts are set out in detail in AQQ at [9]–[22].

23.10 The restructuring, including the financing arrangement, took place in 2003. Under the transitional provisions governing the implementation of the one-tier corporate tax system, a Singapore company had five years to utilise its s 44 account to frank dividends before the one-tier system became fully operational on 1 January 2008. Subsequent to the restructuring, D, F, G and H paid dividends to AQQ, resulting in AQQ's claim of tax credits and consequently a total tax refund of some $13m pursuant to ss 44A and 46 of the ITA (at [22]–[34]).

23.11 The Comptroller disagreed with AQQ's position and invoked s 33 to support his view that the financing arrangement was for the main purpose of deriving a tax advantage and there was no commercial justification for it. The Comptroller therefore took the position that both the (a) dividend income received by AQQ; and (b) interest expenses incurred on the notes which were claimed as deductions were to be disregarded for tax assessment purposes. AQQ was thus assessed to a total overall tax liability of some $9.5m. In view of this, an issue also arose as to the exercise of the Comptroller's power to issue additional assessments under s 74 of the ITA.

23.12 It is not feasible to discuss this important decision in any detail, due to the limitation of scope of this chapter. Further, both AQQ and the Comptroller have appealed to the Court of Appeal, and it is envisaged that a subsequent edition of the SAL Ann Rev would cover the Court of Appeal's decision in due course. Hence, for present purposes, it would be appropriate to simply note certain highlights in the High Court decision, which was delivered by Andrew Ang J:

(a) The court upheld the decision of the Income Tax Board of Review (see [2011] SGITBR 1) that the Comptroller was entitled to invoke s 33 in relation to the financing arrangement. However, Ang J allowed AQQ's appeal on the basis that the additional assessment was not for the tax that ought to be assessed under s 74 of the ITA and was therefore ultra vires. Hence, in substance, in so far as the issue was whether the financing arrangement was caught by s 33, the Comptroller succeeded in his arguments. However, on the ground of technicality, the Comptroller failed...

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