Flower garland sales declarations: IRAS imposed S$6.8 million in taxes & penalties on 8 nightclubs

The Inland Revenue Authority of Singapore (IRAS) has taken action against eight nightclubs since 2021 and imposed over S$6.8 million in taxes and penalties for improper tax declarations of flower garland sales, according to The Straits Times.

IRAS had in a Jul. 3 article reminded businesses of their tax obligations and said some nightclubs have tried “creative” ways to account for the income from garland sales.

What are flower garlands?

Customers buy garlands as a form of appreciation for club performers, who get a portion of the amount paid.

IRAS said GST applies to the full value of the flower garland sales, not just the portion the nightclub keeps.

Businesses should not under-report their tax obligations and must keep proper records, or else they can be penalised.

15 per cent withholding tax

IRAS also said performers, who are non-residents, are subjected to a 15 per cent withholding tax on the salaries and the money they receive from flower garland sales.

Nightclubs are required to file and pay the withholding tax on this income to IRAS by the 15th of the second month from the date of payment to these non-resident performers.

IRAS added that it conducts regular risk-based tax audits to ensure accurate tax filings in all industries.

Businesses have to verify the completeness and accuracy of their tax reporting and submit their supporting documents when requested by IRAS.

2022 case

In 2022, Soon Kok Khoon was jailed and had to pay S$630,861 for evading taxes and omitting goods and services tax (GST).

He operated Club Posh Entertainment and West Palace Entertainment, where flower garlands cost between S$50 and S$100,000.

He made his staff channel the sales revenue of the GST-registered clubs to two shell entities that were not GST-registered.

Accountants were told to leave out the clubs’ revenue from the sale of flower garlands and the output tax.