The Inland Revenue Authority of Singapore (IRAS), government’s main revenue collection body, mandates all corporate taxpayers in the city-state to promptly file their tax returns. Singapore companies are provided with enough time to prepare and file their corporate tax returns – ranging from eleven (11) months (for firms with accounting period ending in January) up to twenty-two (22) months (for firms with accounting period ending in December). Strict compliance to the deadline is greatly encouraged since neglect or failure to fulfill entails penalties from IRAS.
Here are the most common mistakes corporate taxpayers commit include the following:
Some corporate taxpayers understate its income. The government requires all Singapore company incorporation to keep well-maintained accounts and bookkeeping records. These should include complete, serially numbered invoices and receipts for all sold goods and rendered services of the company. The deliberate exclusion of invoices or the receipts in the filed returns is an offense that merits penalties.
Some corporate taxpayers claim deductions for expenses that are non-deductible. There must be a clear line between the business’ expenses and its employees’ expenses. Some companies tend to claim tax deductions for non-deductible expenses. These expenses include money spent on unofficial business activities such as the director or officer’s personal expenses on vacation trips, club memberships or entertainment.
Some corporate taxpayers provide compensation to related parties. Another common mistake springs from stakeholders providing significant but unjustified remuneration to related parties (i.e. parents, children, spouses or siblings). There are even cases when a substantial amount of remuneration is provided to related parties who are not employed in the firm. A reasonable remuneration to a related party can be based on service rendered, qualifications and experience and how it fares compared to an independent employee performing the same tasks and possessing the same qualifications.
Some corporate taxpayers file incorrect expenses. One of the most common slip-ups corporate taxpayers commit is the filing of inaccurate expenses such as filing claims based on estimates. The claiming of expenses/ cost of sales/ purchases should be filed according to the actual amount spent along with valid supporting documents. Moreover, receipts and invoices should be serially numbered.
Some corporate taxpayers fail to maintain business records. This tax filing slip-up is common in individuals, sole-proprietors, and corporate taxpayers. In this regard, proper maintenance of supporting documents that will substantiate all filed claims must be taken seriously. For businesses, claims must be based on actual amount spent on corporate expenses and purchases which must be substantiated by serially numbered receipts and invoices.
By seeking the help of industry professionals, your company will avoid these common tax mistakes and be free from any penalties. Richmond offers a complete range of accounting and tax services for small to mid-sized companies. We aim to help our clients focus on more gainful business activities while we take care of their accounting and tax needs. If you have any questions, get in touch with one of our specialists for a discussion.