Corporate tax filing season is once again upon us. How does this work? Usually, companies will engage a tax agent to work on their tax computation and file the corporate taxes according to the computation. In many cases, companies are required to file Form C-S or Form C-S (Lite). This is because the companies are deemed small companies and the reporting requirements to the Inland Revenue Authority of Singapore (IRAS) are not high. Form C requires supporting documents to be filed but Form C-S and Form C-S (Lite) rely on an honour system. Companies make their calculation and file accordingly. IRAS will conduct random checks or audits to ascertain how companies came up with the declared profits or losses.
Today, IRAS reported that it recovered SGD$79 million in taxes and penalties between July 2020 and June 2023. This was a result of their audits of companies. These recovery efforts were based on erroneous corporate income tax returns that were filed for the years of assessment 2019 to 2021. Of the number of companies where recovery action occurred, two-thirds were from IRAS’ compliance audit programs and the remaining were through random sampling and tip-offs.
The common types of errors?
One of them was the understating or commission of income as revenue was incorrectly recorded. Many of such mistakes also stemmed from poor record-keeping within companies. Of those where action was taken, a proportion were not able to produce documents required to substantiate their expenses while there were others who conflated between business and personal expenses.
Erroneous filing of corporate tax returns may lead to penalties of up to three times the underpaid tax amount and may lead to criminal prosecution as well. Hence, we have consistently been encouraging our clients to practice good accounting habits.
A few basics that companies can adopt:
- Use a proper accounting system that is in line with Singapore’s tax code. An example of such an accounting system would be Xero. Xero will be able to store all invoices, bills and receipts digitally. Hence when asked to produce supporting documents, all the company needs to do would be to refer to its Xero account. (we are a Xero certified partner and you can contact us on how you can adopt Xero to help your business)
- Engage an in-house accountant or alternatively, outsource the company’s accounting to an accounting company like us.
- Engage a tax agent when filing the company’s tax assessment. Alternatively, if you were to do it yourself, use the Basic Tax Calculator that can be found on IRAS’ website and follow closely to the guides that are provided by IRAS when filling in the various fields.
- When in doubt at all, contact IRAS.
Please note that the directors are responsible for the running of the company and hence the onus of filing a proper corporate tax return lies on the shoulders of the directors.
This article is with reference to the Straits Times’ article Iras recovers $79 million in taxes, penalties following audits on companies”.
The editorial team at Singapore Secretary Services
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