**Edited as of 1500H, 8 March 2018 based on input from Lian Chuan Yeoh, Counsel at Allen & Overy. Thank you for the insight Chuan Yeoh!


In his usual succinct style, Justice Choo Han Teck dismissed an appeal against the decision of the Income Tax Review Board’s decision in BRE v Comptroller of Income Tax [2018] SGHC 77 (the “Judgment“), available online here.


The facts of the case are straightforward; the appellant (an Australian national) claimed that he was not liable to pay income tax to the Singapore tax authorities on the basis that he did not have a right to work in Singapore (in this case, he did not have an appropriate work pass).

Consequently, any income derived from his “illegal” employment was not subject to taxation under the Income Tax Act (Cap. 134), available here.

This defence – in this author’s respectful view – was rightly dismissed by Justice Choo on the basis that whether the appellant’s employment in Singapore was lawful or not did not affect the appellant’s liability to pay income tax.

As noted by the Court at [9] of the Judgment:-

It is not disputed that BRE did not have an employment pass with TGS. It is therefore clear that he had been working illegally in that sense, but illegality is a garden of mixed fruit, and not all are forbidden to the tax authority. Unless BRE can show some ground that offends public policy, income earned by a resident is taxable even if that resident did not have the requisite licence for his work. This appeal is dismissed with costs to be taxed if not agreed.”

[emphasis added in underline]

The Income Tax Act (Cap. 134) (the “Act”)

The Act itself spells out an individual’s tax obligations, as well as the fact that the Act operates both within Singapore as well as extra-territorially (viz. outside the jurisdiction).

Section 10(1)(a), (b) and (2)(a) of the Act respectively provide as follows:-

10(1) Income tax shall, subject to the provisions of this Act, be payable at the rate or rates specified hereinafter for each year of assessment upon the income of any person accruing in or derived from Singapore or received in Singapore from outside Singapore in respect of

(a) gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised;

(b) gains or profits from any employment;

(2) In subsection (1)(b), “gains or profits from any employment” means —

(a) any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite or allowance (other than a subsistence, travelling, conveyance or entertainment allowance which is proved to the satisfaction of the Comptroller to have been expended for purposes other than those in respect of which no deduction is allowed under section 15) paid or granted in respect of the employment whether in money or otherwise

[emphasis in bold and underline]

The appellant’s argument was therefore doomed to failure from the outset since – on the facts of the case – his income was derived from an employment agreement with an Australian company, pursuant to which the appellant was employed as a project manager in Singapore.

The fact that he did not have a relevant work pass at the material time was correctly dismissed as immaterial, since the income by the appellant was in fact “…derived from or received in Singapore…in respect of gains or profits from any employment“.

If this were not the case, any person who derives taxable income from Singapore – but who chooses deliberately (or otherwise) not to apply for a work pass in Singapore – would effectively evade Singapore’s tax laws. From a public policy perspective, that would simply be ludicrous.

It also ought to be recalled that this was not an instance where the appellant claimed “double taxation”; his defence was entirely premised on his own illegal act in not obtaining a proper work pass prior to commencing employment in Singapore.

**Singapore – Australia Tax Treaty (the “Treaty”)

It is useful at this juncture to highlight that the Government of Singapore and the Government of the Commonwealth of Australia have in place a tax treaty titled “Agreement between the Government of the Republic of Singapore and the Government of the Commonwealth of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.”

The Treaty is available online here.

Article 11 of the Treaty provides:-

11. Subject to this Article and to Articles 12, 13 and 14, remuneration or other income derived by an individual who is a resident of one of the Contracting States in respect of personal (including professional) services shall be subject to tax only in that Contracting State unless the services are performed or exercised in the other Contracting State. If the services are so performed or exercised such remuneration or other income as is derived therefrom shall be deemed to have a source in, and may be taxed in, that other Contracting State.

Whereas Article 1 of the Second Protocol to the Treaty, provides that Article 19 of the Treaty be substituted as follows:-

The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Articles 1A and 1.”

[emphasis in bold and underline]

Although the amended Article 19 of the Treaty addresses the exchange of information between Singapore and Australia for the “carrying out of the provisions of [the Treaty]”, it is submitted that the Article 19 arguably provides legal basis for one contracting state to enforce its domestic tax laws in another contracting state. This is because the remainder of the amended Article 19 states that information is exchanged for “…the enforcement of the domestic laws concerning taxes of every kind…imposed on behalf of the Contracting States, insofar as the taxation thereunder is not contrary to the [Treaty].”

It is therefore clear that the income derived by the appellant in Singapore (which was presumably not taxed in Australia, otherwise the defence of double taxation would have been raised) was “…remuneration or other income as is derived” from “…personal (including professional) services” that “have a source in, and may be taxed in [Singapore]”.

Imposition of a Penalty?

Although not discussed in the Judgment, it is conceivable that IRAS would seek to impose and collect penalties for unpaid income tax on the appellant in light of the Judgment.

This, however, would not be recoverable by the Singapore authorities in Australia, as the Treaty is limited to “income tax”. It is also a general principle of common law that a country will not impose foreign penalties on its citizens.

This is consistent with the Treaty, which only provides for reciprocity – insofar as the prevention of fiscal evasion is concerned – concerning “income tax”, and not penalties that may be imposed by either of the contracting parties.

If, however, the appellant enters Singapore’s jurisdiction, it is likely that he will be held liable for any penalties that may have accrued by reason of his failure to pay income tax during the relevant period.


As the old adage goes, there is nothing certain but death and taxes.

It would make a nonsense of tax laws if one could simply rely on one own illegality – by reason of working in Singapore illegally – to evade paying income tax to the Singapore tax authorities.


8 April 2018

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