Case Summaries

AXY and others v Comptroller of Income Tax [2018] SGCA 23



4 May 2018

Case summary

AXY and others v Comptroller of Income Tax [2018] SGCA 23
Civil Appeal No 161 of 2016


Decision of the Court of Appeal (delivered by Chief Justice Sundaresh Menon):

Outcome: Court of Appeal dismissed appeal against Comptroller’s decision on exchange of information request from Korea’s national tax authority and clarified principles applicable to exchange of information regime under the Income Tax Act.


Background to the appeal

1          This appeal arose from the decision of the Comptroller of Income Tax (“the Comptroller”) on an exchange of information (“EOI”) request made by the National Tax Service of the Republic of Korea (“the NTS”) pursuant to the Convention between the Republic of Singapore and the Republic of Korea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income as amended by the Protocol signed on 24 May 2010 (“the Convention”). The Convention is incorporated into Singapore’s domestic legislation via s 105D of the Income Tax Act (Cap 134, 2014 Rev Ed) (“the ITA”).



2         At the material time, the NTS was conducting criminal tax investigations into the affairs of five individuals: the first, second and fourth appellants, and two officials of a group of companies owned by the first appellant. The NTS suspected that these five individuals as well as 51 nominee companies incorporated by the first appellant had Singapore bank accounts that were being used to conceal unreported income and evade taxes. On the basis of this suspicion, the NTS submitted an EOI request to the Comptroller on 23 September 2013 (“the Request”) for Singapore bank account information and documents relating to these five individuals and 51 companies for the period from 1 January 2003 onwards.

3          The Comptroller evaluated the Request in view of s 105D and the Eighth Schedule of the ITA (“the Eighth Schedule”), which required an EOI request to contain specific information and statements by the Requesting State’s tax authority. Several rounds of communications between the Comptroller and the NTS ensued, with the Comptroller seeking clarification on various aspects of the Request and the NTS providing further information and documents in response. A meeting was also held in Korea on 21 January 2014 between representatives of the Comptroller and the NTS.

4          After due consideration of the Request, and following the various rounds of communications that had taken place from September 2013 onwards, the Comptroller acceded to the Request and issued production notices against three Singapore banks (“the Production Notices”) on 21 and 27 January 2014. The Production Notices were issued on a confidential basis, and the appellants were not aware of either the Request or these notices until after the notices were issued.

5          The appellants subsequently applied to the High Court for leave to commence judicial review proceedings in respect of the Comptroller’s decision on the grounds of illegality and irrationality. The High Court dismissed the application as it was of the view that the appellants had not made out an arguable case of reasonable suspicion in favour of granting them the remedies sought. It held that the Comptroller had properly directed his mind to the foreseeable relevance of the information sought by the NTS and had appropriately clarified matters with the latter. It further ruled that the objections raised by the appellants pertaining to time bar under Korean law and their disputed tax residency in Korea were irrelevant to the Comptroller’s decision on the Request as they concerned matters of foreign law.


Decision on appeal

6          In explaining its reasons for dismissing the appeal against the High Court’s decision, the Court of Appeal began by first clarifying the principles governing Singapore’s EOI regime. It stated that:

(a)        The standard for assessing an EOI request was whether the information requested by the foreign tax authority was foreseeably relevant for carrying out the tax treaty concerned or enforcing the Requesting State’s domestic tax laws. This standard was not substantively altered by the statutory amendments made in 2013 to the EOI regime. (at [41][44])

(b)        The purpose of the EOI regime was to facilitate the exchange of foreseeably relevant information between tax administrations to the widest possible extent. In assessing an EOI request, the Comptroller had to be satisfied, unless he otherwise permitted, that the information specified in the Eighth Schedule had been provided by the foreign tax authority as required by s 105D(2) of the ITA. In this regard, the statutory framework of the EOI regime afforded the Comptroller a wide degree of discretion. In general, the Comptroller was neither required nor expected to go behind the assertions made by the foreign tax authority. (at [48][57])

(c)       The Comptroller could not, however, act uncritically or unthinkingly in processing an EOI request. If he had any doubts as to whether the Eighth Schedule requirements had been satisfied and/or whether the information sought was foreseeably relevant, he had to clarify these doubts with the foreign tax authority. (at [58][67])

(d)        The validity of an EOI request was normally assessed at the time the request was made. Subsequent matters going towards the actual relevance of the requested information once it had been provided would generally be immaterial to the validity of the Comptroller’s initial decision on the request. (at [69][70])

(e)        However, where a person who was the subject of an EOI request had not been served with notice of the request and came to know of it only after the Comptroller’s decision on the request, that person ought to have the opportunity to raise concerns to the Comptroller as to the validity of the request within a reasonable time, and the Comptroller ought to reconsider his initial decision in the light of those concerns if they appeared to be legitimate. (at [75][76])

7          On the facts of the case, the Court of Appeal held, first, that it would consider the issues raised by the appellants after the time of the Comptroller’s decision on the Request. This was because the EOI process had proceeded covertly. Furthermore, the Comptroller had had the opportunity to consider the subsequent material presented by the appellants and had stood by his initial decision to accede to the Request. (at [86])

8          Second, the Court of Appeal found that the Eighth Schedule requirements had been complied with, and that the confirmations given by the NTS in this regard had not been undermined by the issues raised by the appellants. The appellants had argued, in relation to the NTS’s statement that the Request was in conformity with Korean law and administrative practices, that the dispute over their tax residency in Korea and the time bar under Korean law meant that the NTS had no jurisdiction to impose taxes on them. The Court of Appeal rejected this argument, noting that the proceedings in Korea disputing the appellants’ tax residency had yet to conclude, and thus, it could not be said that there was a clearly established mistake by the NTS as to the appellants’ tax residency. Further, the NTS had confirmed that it still maintained, notwithstanding the appellants’ tax residency challenge, that the appellants were tax resident in Korea and that the Request was valid. Given the statutory framework of the EOI regime, the Comptroller was entitled to accept the NTS’s assertions at face value. As for the appellants’ contention that the NTS was time-barred under Korean law from pursuing their tax liabilities for the period from 2003 to 2007, the Court of Appeal pointed out that the question of a possible time bar had arisen only after the issuance of the Production Notices; time bar was not an issue both at the time the Request was made and at the time the Production Notices were issued. (at [90][96])

9          In relation to the NTS’s statement that it had pursued all available means in Korea to obtain the requested information except those that would give rise to “disproportionate difficulties”, the appellants had argued that the NTS had not fulfilled this requirement because it had not approached them directly for the information sought. Furthermore, four days after the Request was made, the NTS had obtained a search and seizure warrant in Korea against the first appellant’s offices, which showed that there were other measures open to the NTS at the time of the Request. The Court of Appeal rejected these arguments. It noted that the NTS had previously asked the appellants on numerous occasions to assist in its tax investigations and provide documents, but to no avail; the NTS had also expressed concerns that the appellants might destroy relevant evidence. In addition, the search and seizure warrant in respect of the 1st appellant’s offices in Korea would likely not have applied to documents pertaining to bank accounts in Singapore, which was what was sought in the Request. (at [98]–[101]).

10        Third, the Court of Appeal considered that in assessing the Request, the Comptroller had compiled with the Inland Revenue Authority of Singapore’s internal procedures for processing EOI requests, and had properly satisfied himself that the Request complied with the ITA and the Convention. Among other things, the Request had been reviewed by an EOI review committee, and the Comptroller had sought specific clarifications from the NTS to understand the relevance of the requested information to the latter’s tax investigations. It was clear from the evidence that the Comptroller had made the decision to accede to the Request based on the totality of all the information and material provided to him by the NTS over the course of several months from September 2013 to January 2014. ([106]–[112])

11        In the circumstances, the Court of Appeal held that the appellants had not established an arguable case of reasonable suspicion that the Comptroller’s decision was tainted by any illegality or irrationality so as to afford grounds for judicial review. The Court of Appeal thus upheld the High Court’s decision refusing the appellants leave for judicial review. ([113])


This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.