The Inland Revenue Authority of Singapore (IRAS) continues to place significant audit focus on Missing Trader Fraud (MTF), a GST risk area that can result in the denial of input tax claims, penalties, and interest. Businesses may be exposed even where transactions are commercially genuine if adequate due diligence has not been performed.
Our firm provides comprehensive GST advisory and compliance services to help clients navigate these risks and safeguard input tax claims.
Overview of Missing Trader Fraud
Missing Trader Fraud generally occurs when a supplier:
Charges GST on taxable supplies;
Fails to declare or remit the corresponding output tax to IRAS; and
Subsequently becomes uncontactable or ceases operations.
In such cases, IRAS may disallow the purchaser’s input tax claims if it determines that the purchaser knew or ought reasonably to have known that the transaction was connected to fraudulent activity.
IRAS has highlighted MTF as a key enforcement area and provides guidance on audits and investigations:
https://www.iras.gov.sg/taxes/goods-services-tax-(gst)/getting-it-right/gst-audits-by-iras/audits-and-investigations-on-missing-trader-fraud
IRAS’ Application of the Knowledge Principle
IRAS applies the Knowledge Principle when assessing input tax claims associated with Missing Trader Fraud. Under this principle, input tax may be denied where a business:
Had actual knowledge of the fraud; or
Failed to take reasonable steps such that it should have known of the associated risks.
The absence of intent to participate in fraudulent arrangements does not, in itself, constitute a defence. The assessment focuses on whether the business exercised an appropriate level of commercial awareness and tax due diligence, having regard to the facts and circumstances of the transaction.
Due Diligence Expectations: IRAS’ Three-Pillar Framework
IRAS has published an e-Tax Guide, “Due Diligence Checks to Avoid Being Involved in Missing Trader Fraud”, outlining structured measures for managing MTF risks:
https://www.iras.gov.sg/media/docs/default-source/e-tax/etax-guide_due-diligence-checks-to-avoid-being-involved-in-missing-trader-fraud.pdf
The guide is based on a three-pillar framework:
Pillar 1: Identify and Assess Risk Indicators
Businesses should assess risk indicators such as:
Significantly below-market pricing or abnormal profit margins;
Newly incorporated or low-substance suppliers;
Complex or unusual payment arrangements; and
Transactions lacking clear commercial rationale.
Pillar 2: Perform Due Diligence Checks
Reasonable checks should be carried out and documented, including:
Verification of GST registration status;
Assessment of supplier’s business activities and operational presence;
Review of contracts, invoices, and supporting documentation;
Validation of payment flows and bank account ownership.
Pillar 3: Respond to Identified Risks
Businesses are expected to take appropriate actions when risks are identified:
Seek clarifications or supporting evidence from the supplier;
Escalate concerns internally;
Refrain from proceeding if risks cannot be mitigated.
Failure to act on identified risks may jeopardise GST input tax claims.
Potential Consequences of Inadequate Due Diligence
Where IRAS concludes that due diligence has not been performed to a reasonable standard, it may:
Disallow GST input tax claims;
Impose penalties and late payment interest;
Expand the scope of audits or investigations.
These outcomes may occur even when goods or services were genuinely received and payments made.
How Our GST Advisory Services Can Help
Our team assists businesses in implementing robust GST risk management and compliance procedures, including:
GST Risk Assessment & Health Checks – Identifying high-risk suppliers and transactions;
Due Diligence Process Design – Developing and documenting checks aligned with IRAS’ three-pillar framework;
Input Tax Validation – Reviewing historical and ongoing input tax claims to ensure compliance;
Supplier Onboarding & Monitoring – Establishing procedures to mitigate exposure to Missing Trader Fraud;
Audit Support – Advising and representing clients during IRAS audits or investigations.
By partnering with our advisory team, businesses can demonstrate that they have performed reasonable due diligence, helping to safeguard input tax claims and minimise exposure to penalties.
Conclusion
Missing Trader Fraud remains a key area of regulatory focus for IRAS. GST-registered businesses must exercise commercial and tax diligence, adopt structured procedures, and document all risk management activities.
Our GST advisory services are designed to help clients comply with IRAS guidance, manage GST risks effectively, and maintain confidence in their input tax claims.