Perhaps the most telling detail of all is that this story has an almost predictable quality. A dentist who makes a good living by most standards—roughly $280,000 a year from a private practice—decides that the tax bill is too high. He establishes a business. He makes arrangements for that company to receive his salary rather than paying it to him directly. On paper, the math appears appealing because the corporate tax rate is lower than the personal income tax at that level. And it probably seems to function perfectly for a while.
Then IRAS knocks. In what investigators described as a purposeful tax avoidance scheme, the Inland Revenue Authority of Singapore recently apprehended a dentist who had transferred what appears to be about $765,000 in income through a privately held company. The structure of the arrangement was simple: pay a lower tax rate, route salaries through a corporate entity, and keep the difference. It’s not a novel concept. When the underlying income is personal employment income that is being passed off as corporate revenue, it is also illegal.
Due to Singapore’s progressive taxation of personal income, an individual earning $300,000 might have an annual tax bill exceeding $30,000, depending on relief. In contrast, corporate tax is levied at a fixed rate of 17% on chargeable income, with a number of exemptions for smaller businesses. The disparity is real and can seem substantial to high earners. That’s the allure. People also run into problems there.
For years, IRAS has been warning about this kind of arrangement. In a 2020 case, a dental surgeon’s company failed to register for GST on time and omitted business income, resulting in fines and penalties totaling more than $40,000. The pattern is similar: dental professionals making enough money to draw attention, and financial arrangements that don’t quite hold up under scrutiny. However, that case involved a different kind of error—omissions rather than outright rerouting.
The underlying pressure that appears to be driving these cases is what makes them intriguing, rather than the scheme itself, which is rather simple. By most accounts, an associate dentist in a private group practice makes between $9,000 and $15,000 per month. This is respectable, but not very high considering the initial investment needed to get there. The cost of studying dentistry abroad can range from $500,000 to $700,000. For many associates, there are no CPF contributions. No sick leave that is paid. No yearly leave. A lean month is one that is quiet.
The end result is a profession that pays enough to attract lifestyle expectations, but not always enough to comfortably meet them, particularly when one considers Singapore’s cost of living and tax structure. These schemes may seem worthwhile because of the discrepancy between expected earnings and actual take-home pay. Even if the execution is not clear, the reasoning is.
IRAS does not agree with that logic. Two times the amount of tax undercharged is the maximum penalty for filing false returns. Jail time is a possibility. Additionally, since 2020, the authority has rewarded informants with cash, up to 15% of the tax collected and up to $100,000, while maintaining the confidentiality of their identities. The calculus is significantly altered by that final detail. This implies that there is now a financial incentive for coworkers, accountants, clinic employees, or even unhappy business partners to come forward.
This is a simple lesson. Tax planning is both lawful and frequently prudent. It is not appropriate to route personal income through a corporate entity with the express purpose of misrepresenting its nature. The precision of Singapore’s tax enforcement and the severity of its penalties have made it rare for the risk to outweigh the savings. Before reaching for the corporate structure, dentists—or any other high-earning professional thinking along similar lines—should probably be aware of this.
