Dentist used his own company to receive his salary and pay less tax

Dentist used his own company to receive his salary and pay less taxSign up now: Get ST's newsletters delivered to your inboxA dentist thought he could pay less taxes if his salary earned from a clinic was paid into his private company. ST ILLUSTRATION: MANNY FRANCISCOTan Ooi BoonPublished Jul 11, 2026, 05:00 AMUpdated Jul 11, 2026, 05:00 AMSet as preferred sourceSign up for ST InvestMe and unlock full access to exclusive insights and financial literacy courses today.SINGAPORE – A dentist thought it was a good idea to channel his salary through a company that he set up so that he could pay less tax.

He was earning around $280,000 annually working for a clinic, but he later arranged for this to be paid to his privately owned company.From 2013 to 2016, he declared an annual salary of between $40,000 and $110,000 from his own company.In reality, he had a tidy side income of $765,000 over those four years – an average of $190,000 a year – in the form of “tax-exempt” dividends from his own company.

He believed he could reduce his tax bill by having his clinic salary taxed as company income at a lower tax rate instead of personal income.As a rough comparison, those earning about $300,000 can pay an annual tax of over $30,000, depending on their reliefs, but the same amount reported by a small company may attract only a tax liability far below $20,000 after various rebates and concessions.In this case, the disparity between the dentist’s past and present tax returns caught the attention of the Inland Revenue Authority of Singapore (IRAS), which found that his company was set up to allow him to pay less tax.

IRAS then invoked Section 33 of the Income Tax Act to disregard his arrangement, so that the dividends he received would also be taxed as his personal income.Scheme solely to avoid taxThe dentist appealed to the High Court against the decision in 2020, arguing that his company was legitimately set up to operate a dental clinic. He added that having a private limited company would shield him from personal liability should his clinic be sued or fall into debt.

Although that might have been one of his purposes, the court found that the main reason for the arrangement was to allow him to receive income from the clinic where he worked.While he claimed that his company was set up for general practice, in truth, the only patients he had throughout the relevant tax period were those from the same clinic.More on this topicIRAS nabs 279 high-income earners over sham arrangements to pay less taxIRAS catches 422 landlords for not reporting rental income properly When then High Court Judge Choo Han Teck heard this case, he noted that Section 33 was not enacted to target those who set up private limited companies for various reasons, such as delegating the management of the business and limiting the liability of the owners.

Instead, the main objective is to disregard or alter arrangements created by taxpayers to avoid taxes that would otherwise be payable.The judge said the dentist’s corporate scheme was precisely the type of case covered by Section 33, since his company’s main, if not the only, purpose was to enable him to avoid tax.He went on to explain that revenue law is one of the most “legislation-specific laws”, as there is no need for anyone to pay taxes unless the Income Tax Act specifically provides for it.

This means that IRAS cannot levy taxes on any arrangement or scheme that falls outside the Act.That said, the judge noted that “a person cannot avoid paying taxes for work done by him simply by assigning his pay to someone else”, because such an arrangement, which was used by the dentist in this case, would be covered under Section 33.What this means is that it is hard to pull the wool over the eyes of the taxman if the sole purpose of your non-genuine business arrangement is to pay less tax.

Check out The Straits Times InvestMe microsite for exclusive content and courses to boost your financial literacy.More on this topicRethink wealth and build a meaningful life at the July 18 InvestMe eventRetire with more money? Learn how to grow $1m in your CPF from the first InvestMe event videoTan Ooi Boon writes for and oversees the Invest section of The Straits Times.

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