The Inland Revenue Authority of Singapore (IRAS) has stepped up audits and investigations into Missing Trader Fraud (MTF), a form of GST fraud that can expose businesses to significant tax adjustments, penalties, and interest—even where the business believes it has acted in good faith.
This article outlines what Missing Trader Fraud is, why it matters, and the practical steps businesses must take to protect their GST input tax claims.
What Is Missing Trader Fraud?
Missing Trader Fraud typically arises when a supplier charges GST on sales but subsequently:
Fails to report the taxable supplies to IRAS; and
Does not account for or pay the output tax collected; and
Becomes uncontactable or ceases operations.
In such cases, IRAS may disallow the purchaser’s input tax claims if it concludes that the purchaser knew or should have known that the transaction was connected to fraudulent activity.
IRAS Audit Focus and the Knowledge Principle
IRAS applies the Knowledge Principle, under which input tax claims may be denied if a business:
Had actual knowledge of the fraud; or
Should reasonably have known, based on the circumstances, that the transaction was linked to Missing Trader Fraud.
Importantly, the absence of intent to defraud does not automatically protect a business. The key consideration is whether reasonable due diligence was performed.
IRAS has published guidance and conducts audits specifically targeting Missing Trader Fraud arrangements.
IRAS’ Three-Pillar Due Diligence Framework
To mitigate the risk of being implicated in Missing Trader Fraud, IRAS expects GST-registered businesses to implement due diligence measures based on the following three pillars:
Pillar 1: Identify and Assess Risk Indicators
Businesses should be alert to red flags such as:
Unusually low pricing or abnormal profit margins
Newly incorporated or dormant suppliers
Cash-only transactions or complex payment flows
Requests for rapid or backdated transactions
Pillar 2: Perform Due Diligence Checks
easonable checks should be performed and documented, including:
Verifying the supplier’s GST registration status
Understanding the supplier’s business activities and operating premises
Reviewing contractual terms and commercial rationale
Confirming bank account ownership and payment arrangements
Pillar 3: Respond to Identified Risks
Where risks are identified, businesses are expected to:
Seek clarifications or supporting documentation
Escalate concerns internally
Reconsider or decline the transaction if risks cannot be satisfactorily addressed
Merely identifying risks without taking appropriate follow-up action may not be sufficient.
Consequences of Non-Compliance
Where IRAS determines that due diligence was not performed to a reasonable standard, it may:
Deny GST input tax claims
Impose penalties and late payment interest
Initiate further audits or investigations
These outcomes can arise even if the underlying goods or services were genuinely received.
Practical Takeaways for Businesses
Due diligence is not optional—it is a key condition for protecting GST input tax claims.
Documentation is critical. Businesses should retain evidence of checks performed.
Higher-risk industries and transactions warrant enhanced scrutiny.
Internal GST controls and supplier onboarding procedures should be reviewed regularly.
Conclusion
Missing Trader Fraud remains a significant compliance risk in Singapore’s GST landscape. IRAS expects businesses to act with commercial awareness and to take proactive steps to assess and manage GST risks in their supply chains.
Implementing robust due diligence procedures aligned with IRAS’ guidance is essential to safeguarding GST input tax claims and avoiding costly disputes with the tax authority.