Wee Teng Yau v Comptroller of Income Tax: Income Tax Avoidance via Corporate Structure

Dr. Wee Teng Yau appealed against the Comptroller of Income Tax's decision to tax him on fees received by his company, Straighten Pte Ltd (SPL), from Alfred Cheng Orthodontic Clinic Pte Ltd (ACOC). The High Court dismissed Dr. Wee's appeal, finding that the arrangement's primary purpose was tax avoidance, thus falling under s 33(1) of the Income Tax Act. The court also addressed the Comptroller's cross-appeal regarding the interpretation of AQQ and the 'personal exertion' principle, noting that the Comptroller's submissions could have been incorporated in its submissions in TA 10 of 2020.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Dr. Wee’s appeal is dismissed. The Comptroller’s submissions regarding the Income Tax Board of Review’s interpretation were noted.

1.3 Case Type

Tax

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

The High Court held that Dr. Wee's arrangement to receive income through his company, SPL, was primarily for tax avoidance and thus taxable under s 33(1) of the Income Tax Act.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Wee Teng YauAppellant, RespondentIndividualAppeal DismissedLostLau Kah Hee, Muhammad Fikri Yeong Bin Iskandar Shah
Comptroller of Income TaxRespondent, AppellantGovernment AgencyAppeal UpheldWonZheng Sicong, Lau Sze Leng Serene

3. Judges

Judge NameTitleDelivered Judgment
Choo Han TeckJudgeYes

4. Counsels

Counsel NameOrganization
Lau Kah HeeBC Lim & Lau LLC
Muhammad Fikri Yeong Bin Iskandar ShahBC Lim & Lau LLC
Zheng SicongInland Revenue Authority of Singapore
Lau Sze Leng SereneInland Revenue Authority of Singapore

4. Facts

  1. Dr. Wee was employed by ACOC from January 2011 to May 2012.
  2. Dr. Wee incorporated SPL on May 1, 2012, becoming its sole director and shareholder.
  3. After May 1, 2012, ACOC paid SPL for Dr. Wee's services instead of paying Dr. Wee directly.
  4. SPL paid Dr. Wee a salary and director's fees, and declared tax-exempt dividends.
  5. Dr. Wee's remuneration from SPL was significantly lower than his previous direct earnings from ACOC.
  6. The Comptroller treated the fees received by SPL from ACOC as Dr. Wee's income.

5. Formal Citations

  1. Wee Teng Yau v Comptroller of Income Tax and another appeal, Tax Appeals Nos 10 and 11 of 2020, [2020] SGHC 236

6. Timeline

DateEvent
Dr. Wee employed by Alfred Cheng Orthodontic Clinic Pte Ltd
Straighten Pte Ltd incorporated by Dr. Wee
Dr. Wee provides dental services to ACOC through SPL
Hearing date
Hearing date
Judgment reserved

7. Legal Issues

  1. Tax Avoidance
    • Outcome: The court held that the arrangement's primary purpose was tax avoidance, thus falling under s 33(1) of the Income Tax Act.
    • Category: Substantive
    • Sub-Issues:
      • Use of corporate structure to reduce personal income tax
      • Bona fide commercial reasons vs. tax avoidance as main purpose
    • Related Cases:
      • [2014] 2 SLR 847

8. Remedies Sought

  1. Declaration that Dr. Wee is only taxable on his personal income from SPL
  2. Reversal of the Comptroller's tax assessment

9. Cause of Actions

  • Avoidance of Income Tax

10. Practice Areas

  • Tax Law
  • Tax Litigation

11. Industries

  • Healthcare
  • Dental

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Comptroller of Income Tax v AQQ and another appealHigh CourtYes[2014] 2 SLR 847SingaporeCited regarding the interpretation and application of s 33 of the Income Tax Act.
Spratt v Commissioner of Inland RevenueUnknownYes[1964] NZLR 272New ZealandCited for the 'personal exertion' principle, which the court found not directly applicable in this case due to the existence of s 33 of the Income Tax Act.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Income Tax Act (Cap 134, 2008 Rev Ed)Singapore
Income Tax Act (Cap 134, 2014 Rev Ed)Singapore
s 33(1) of the Income Tax ActSingapore
s 33(3)(b) of the Income Tax ActSingapore

15. Key Terms and Keywords

15.1 Key Terms

  • Tax avoidance
  • Income Tax Act
  • Section 33(1)
  • Section 33(3)(b)
  • Bona fide commercial reasons
  • Personal exertion principle
  • Arrangement
  • Tax advantage
  • Director's remuneration
  • Tax-exempt dividends

15.2 Keywords

  • Tax avoidance
  • Income tax
  • Corporate structure
  • Singapore
  • Dentist
  • SPL
  • ACOC

16. Subjects

  • Taxation
  • Corporate Tax
  • Personal Income Tax

17. Areas of Law

  • Revenue Law
  • Income Taxation
  • Tax Avoidance