Paid Yourself $5,000 a Month and Took the Rest as Dividends? IRAS Is Watching.
A Singapore High Court ruling in June 2026 has confirmed what IRAS has been signalling for years: putting your income through a company doesn't make it company income. Here's what Section 33 of the Income Tax Act actually does, and how to tell whether your structure is on the right side of it.
What happened
Three specialist obstetricians and gynaecologists left a public hospital in 2004 to start a private practice together. They incorporated a clinic, took equal shares, and put themselves on employment contracts at $5,000 a month. Over the next decade, each doctor layered more companies on top: individual medical companies, then individual surgical companies that billed patients for inpatient work while the original clinic billed for outpatient work. Salaries stayed at $5,000 to $6,000 a month.
The practice, meanwhile, was doing very well. Between 2013 and 2018, one of the doctors received more than $7.4 million in dividends from his companies and drew millions more in interest-free shareholder loans — while still reporting a $5,000 monthly salary. Before he went into private practice, he had been earning around $45,600 a month.
IRAS audited the arrangement and invoked Section 33 of the Income Tax Act. It disregarded the structure, reallocated the profits to the doctors as employment income, and clawed back the start-up and partial tax exemptions the companies had claimed. The doctors appealed to the Income Tax Board of Review, lost, and appealed again to the High Court. On 18 June 2026, they lost there too — Tan Chek Jin Adrian and others v Comptroller of Income Tax [2026] SGHC 132.
What Section 33 actually says
Section 33 is Singapore's general anti-avoidance rule. It is deliberately broad. In plain terms, where IRAS is satisfied that the purpose or effect of an arrangement is — directly or indirectly — to alter the incidence of tax, to relieve someone from a tax liability, or to reduce or avoid tax, the Comptroller may disregard or vary that arrangement and make whatever adjustments he thinks appropriate to counteract the tax advantage.
Note what that means in practice. IRAS doesn't need to prove you lied. It doesn't need to unwind your companies or take you to criminal court. It simply taxes you as if the arrangement had never existed.
There is an escape hatch, in Section 33(3)(b). The rule doesn't apply to an arrangement carried out for bona fide commercial reasons where obtaining a tax advantage was not one of its main purposes. That's the whole ball game — and it's where the doctors' case was decided.
Tax evasion means hiding or falsifying income. It's a crime. Tax avoidance means declaring everything honestly, but structuring transactions so that less tax is payable. It isn't a crime — and nobody in this case was charged with one. But since Year of Assessment 2023, a successful Section 33 challenge carries a 50% surcharge on the additional tax assessed, on top of the tax itself. The downside of a failed structure now comfortably exceeds the upside of a successful one.
Why the doctors lost
Four things in the judgment matter to anyone operating through a company.
1. The court looked at the whole picture, not each step
The doctors argued that the clinic, the medical companies and the surgical companies were three separate arrangements, each defensible on its own. The court disagreed. Section 33 is wide enough to catch a combination of steps, even where each individual step looks unobjectionable in isolation. Incorporating a company is normal. Paying a salary is normal. Declaring a dividend is normal. Doing all three in a particular pattern, year after year, can still be an arrangement caught by Section 33.
2. Purpose is judged over time, not just at incorporation
The doctors leaned heavily on their intentions back in 2004. The court found that too narrow. Structures run for years; motives evolve as the business grows and as tax law changes. So the question isn't only why did you set this up — it's how have you used it since.
3. The salary never moved
This is the detail that should make most business owners sit up. The court accepted there may well have been genuine commercial reasons for setting up the original clinic. What was never adequately explained was why a $5,000 monthly salary stayed at $5,000 as the practice became dramatically more profitable — while the profits it generated came out as tax-exempt dividends and interest-free loans instead. A remuneration figure frozen in place while the underlying business multiplies is, on its face, a number that isn't tracking economic reality.
4. Evidence is personal, and you have to give it
The Section 33(3)(b) exception depends on your commercial reasons and your intended outcomes. Two of the three doctors did not give evidence themselves; they relied on the third to speak for all of them. That materially weakened their case. Commercial substance is something each taxpayer has to be able to evidence, not something a co-shareholder can vouch for on your behalf.
So is having a company a problem?
No. This is the point that keeps getting lost in the headlines. Hundreds of thousands of Singapore businesses operate through private limited companies for entirely sound reasons — limited liability, the ability to bring in partners, raising capital, hiring, contracting, succession, professional credibility. IRAS's own statement on the case put it well: taxpayers are expected to ensure their tax affairs reflect the commercial and economic reality of their arrangements.
The company isn't the problem. The mismatch is. When an entity exists mainly as a conduit — a letterbox that receives income generated entirely by one person's personal exertion and pushes it back out in a lower-taxed form — there is nothing commercial for the structure to stand on.
A quick self-check
If you're a professional, consultant or owner-operator working through one or more companies, work through these honestly:
- Can you articulate a commercial reason for each entity that has nothing to do with tax — and would you have set it up anyway if the tax outcome were neutral?
- Does your salary bear any relationship to what you'd have to pay someone else to do your job? If you'd have to pay a replacement $30,000 a month and you're paying yourself $5,000, that gap needs an explanation.
- Has your remuneration moved as the business has grown? A number that hasn't changed in a decade of rising profits is a flag.
- Is the income being generated by the business, or by you personally? Where the value is essentially your own personal exertion, IRAS is more likely to attribute it to you.
- Are shareholder loans real loans? Interest-free, open-ended, never-repaid advances that function as drawings will be read as what they functionally are.
- Are you claiming start-up or partial tax exemptions across multiple entities that all do essentially the same thing? Multiplying entities to multiply exemptions is one of the patterns IRAS has expressly flagged.
- Could you evidence all of the above yourself — with board minutes, contracts, and a paper trail — if you were asked to next year?
And one more that came up repeatedly in the reporting on these cases: many of those caught said their accountant or lawyer had advised them to do it. That is not a defence. The tax liability, and the 50% surcharge, land on you.
Our take
The line between planning and avoidance isn't drawn by cleverness. It's drawn by substance. A structure that reflects how your business genuinely operates — who does the work, where the value is created, what people would be paid at arm's length — will generally survive scrutiny, and will also happen to be a structure that gives you useful numbers to run the business with. A structure built backwards from a tax outcome does neither.
That's really the same idea we come back to constantly at LUMA: your accounts should describe reality. When they do, compliance is a by-product rather than an anxiety. When they don't, you're carrying a risk you can't see and running a business on numbers that don't mean anything.
If you're not sure which side of the line your structure sits on, the time to find out is now — not when the audit letter lands.
Not sure your structure would hold up?
We help Singapore business owners get their corporate structure, remuneration and tax filings aligned with commercial reality — so the numbers work for the business and stand up to scrutiny. Have a chat with us, no obligation.
Message us on WhatsAppThis article is general information based on publicly reported facts and the published judgment in Tan Chek Jin Adrian and others v Comptroller of Income Tax [2026] SGHC 132. It is not tax or legal advice, and it doesn't take account of your specific circumstances. Please speak to a qualified adviser about your own position before acting.