Back in Apr 2007, I became aware of the ongoing ding-donging between YHS and IRAS on a “simple” definition issue that may result in YHS paying IRAS millions of dollars.
What is the ding-donging about?
In 2000, IRAS wants to treat $108.2 million of the revaluation surplus of $128.8 million as a taxable gain. The tax payable by YHS would be $23.3 million.
YHS has insisted that the $108.2 million is capital in nature and thus not taxable.
What is today’s news about?
Apparently, the statutory time limit for assessing profits on the Sterling project for YA 2001 expires at the end of this month. So IRAS has issued a “protective assessment” on the tax payable to avoid the situation of the “claim” becoming a legal-no-show (ie. YHS can no longer be legally obliged to answer/pay).
– YHS applied for a “standover without penalty” of the tax raised by the protective assessment. IRAS granted the request.
– YHS will make a tax provision of $23.3 million and consequently issued a profit warning.
For most of the taxpayers, you pay first if you wish to object to the assessment. If you don’t, you got fined. For YHS, standover without penalty was granted.
Friends, this series of “tactical” moves of creating the revaluation reserve prior to converting the land from factory use to condominium property developments, subsequently objecting to the tax assessment and dragging it over the last 6 years should be documented and reviewed in MBA/tax classes.