Singapore Company Incorporation with Paul Hype Page
Company Registration at Paul Hype Page Singapore

Singapore Taxation

FAQ Singapore Tax

Penalties For Filing A Wrong Return2020-07-01T15:06:57+08:00

How to inform IRAS? Penalties for filing a wrong return

Answer: By post: Inland Revenue Authority of Singapore 55 Newton Road, 3rd storey, Revenue House

Offences for filing a wrong return? Penalties for filing a wrong return

Answer: A person who files a wrong return due to negligence or without reasonable excuse can be brought to court. If convicted under Section 95, the person may pay a penalty up to two times the amount of tax undercharged. A fine or an imprisonment will also be imposed. If a person is found to be evading tax, he can pay a penalty up to three times (if convicted under Section 96), or up to four times (if convicted under Section 96A) of the tax undercharged. A fine or an imprisonment will also be imposed. Informing IRAS voluntarily on the omissions or errors made

Why you should inform IRAS voluntarily?

Answer: Instead of imposing maximum penalties of up to 200% of tax undercharged for submission of incorrect Income Tax returns due to negligence or without reasonable excuse, IRAS is prepared to waive the penalty or accord a reduced penalty of 5% p.a. for first-time voluntary disclosures which meet the qualifying conditions under the IRAS Voluntary Disclosure Program.

Tips For SMEs On Form C Filing2020-07-01T15:06:41+08:00

Checklist to guide companies in filing Form C? Tips for SMEs on Form C Filing

Answer: The following checklist is to guide companies in ensuring a prompt and complete filing of Form C.

Due date for filing of Form C Tips for SMEs on Form C

Answer: Whether a company has made profits or losses in the preceding accounting year ended in 2008, it is required to file its Form C together with the company’s financial accounts, tax computation and relevant supporting documents. A full set of these documents must be submitted to IRAS by 30 November 2009.

Have you done the following in preparation of your Form C submission?

Answer:

  1. Preparation of AccountsPrepare a full set of accounts according to the Companies Act, including:
    • Directors’ report
    • Auditor’s report (except for companies that enjoy audit exemption*)
    • Balance sheet
    • Profit and loss statement
    • Notes to the accounts
    • Statement by Directors
    • Prepared a detailed profit and loss statement
  1. Preparation of Tax Computation and Supporting Schedules
    • Prepared tax computation
    • Collated all relevant donation receipts to support claims if you have not given your tax reference number to the IPCs
  1. Completion of Form C and Appendices
    • Read the explanatory notes to Form C and Appendices before completing the forms
    • Where applicable, declared in Form C that your company has satisfied all qualifying conditions to claim tax exemption for new start-up companies
    • Ensured the chargeable income declared is before exempt amounts
    • Signed and completed all parts of the forms

*Under the Companies Act, dormant companies and exempt private companies with annual revenue of not more than $5million are not required to have their accounts audited. An exempt private companies are companies which

  • has not more than 20 shareholders and none of them is a corporation; or is wholly owned by the Government, which the Minister, in the national interest, declares by notification in the Gazette to be an exempt private company.

Common tax concessions and rules for companies Below are some of the more common tax concessions that companies may benefit from by way of a reduction in income tax. Tax Exemption Scheme for New Start-Up Companies The tax exemption scheme for new start-up companies was first introduced in YA 2005 and enhanced in YA 2008 to support entrepreneurship and to help local enterprises grow. Details of the tax exemption are as follows:-

Tax exemption on the 1st $ 300,000 chargeable income
100% exemption on the 1st $100,000 chargeable income$100,000
50% exemption on the next $200,000 chargeable income$100,000
Maximum exempt amount each year$200,000

  To qualify for the scheme in YA 2009, a company must have any of its first three YAs upon incorporation falling in YA 2009. In addition, the company must:

  • be incorporated in Singapore (other than a company limited by guarantee);
  • be a tax resident in Singapore for YA 2009; and
  • have no more than 20 shareholders throughout the basis period for YA 2009 where:
    1. all of the shareholders are individuals beneficially holding the shares in their own names; or
    2. at least one shareholder is an individual beneficially holding at least 10% of the issued ordinary shares of the company.

All other companies, including non start-up companies, will be accorded partial tax exemption. Companies can enjoy a partial tax exemption on normal chargeable income of up to $300,000.

Details of the partial tax exemption are as follows:-

Partial tax exemption on the 1st $ 300,000 chargeable income
75% exemption on the 1st $10,000 chargeable income$7,500
50% exemption on the next $290,000 chargeable income$145,000
Maximum exempt amount each year$152,500

 

  1. Renovation and Refurbishment Costs – Tax deduction under Section 14QWith effect from YA 2009, companies can claim for tax deduction on qualifying capital expenditure incurred on renovation or refurbishment works (R&R costs) between 16 February 2008 and 15 February 2013. Claims are capped at $150,000 in equal portions over three years – a maximum of $50,000 a year.For example, a company which spent $200,000 in March 2008 on R&R costs can claim a tax deduction of $50,000 ($150,000/3) for YA 2009 to YA 2011.
  2. Capital Allowance – Tax deduction under Section 19A(1)With effect from YA 2009, companies that purchase commercial vehicles with maximum laden weight not exceeding 3,000 kg and motor cycles for business purposes will be able to claim capital allowance over three years. Previously, such assets were granted capital allowance over their prescribed working life, which is generally six years.
  3. Loss Carry-Back Relief SystemAs announced in 2009 Budget, the loss carry-back relief scheme has been enhanced for YAs 2009 and 2010. Companies can carry back their current year unutilised capital allowances and/or trade losses to the previous three YAs, subject to conditions. The amount of capital allowances and/or trade losses that can be carried back has also been increased from $100,000 to $200,000.For example, a company which has incurred a trade loss of $300,000 in YA 2009 can carry back $200,000 (the maximum) to YA 2006. This loss will be offset against the assessable income of the company, thus reducing the tax amount. Based on the difference, a tax refund will then be paid to the company.
  4. Carry Forward of Unutilised Capital Allowances, Losses and/or DonationsCompanies can carry forward the current year unutilised capital allowances, losses and/or donations to offset against the assessable income for the subsequent YAs, subject to certain conditions.
  5. Training Costs (Net of Grant) Many companies send staff for training courses to enhance their level of skills and productivity. To encourage Singaporeans to upgrade their skills so they can stay employed or seek re-employment, the Government also provides course fee subsidies to companies that send their workers for training.Companies that incur costs for the training of staff in areas relevant to the business will be generally entitled to claim a deduction for such expenses incurred. If companies receive or obtain government grants that help to reduce their training costs, only the training costs net of grant (i.e. actual costs borne by companies), will be tax deductible.
    1. Tax exemption will be granted on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income remitted into Singapore on or after 1st June 2003, subject to the two conditions below:
      • The foreign income had been subjected to tax in the foreign country from which they were received.
      • The highest corporate tax rate (headline tax rate) of the foreign country from which the income was received is at least 15%.
    2. Retrenchment costs incurred in the process of streamlining business operations and to improve company’s profitability are tax deductible.
    3. Interest and other borrowing costs, which are incurred as substitute for interest expense or to reduce the interest costs, for the purpose of financing business operations are tax deductible.
    4. Donations made to an approved Institution of a Public Character (IPC) or the Singapore Government that benefit the local community will qualify for double tax deduction.
    5. View the mistakes commonly made by companies in their income tax filing and their tax computations.

A case study illustrating how companies can lower their tax burden by claiming the various tax concessions can be found here.

Business Expenses2020-07-01T15:06:07+08:00

How to claim for Section 14Q deduction? Business expenses

Answer: If you wish to claim for Section 14Q deduction on the qualifying expenditure, you have to show the Section 14Q deduction in your tax computation and submit an itemised list of the renovation or refurbishment works. You also have to confirm on the itemised list that the renovation or refurbishment works do not require the approval of the Commissioner of Building Control. For more details on the Section 14Q deduction, please refer to the e-Tax Guide “Deduction For Expenditure Incurred On Renovation or Refurbishment Works” (124KB).Donations Donations are not deductible expenses as they are not incurred in the production of income. However, you can claim for deduction on donations made to an approved Institution of a Public Character (IPC) or the Singapore Government which benefit the local community. For approved donations made on or after 1 Jan 2002, you can claim for double deduction, that is, twice the amount donated. For approved donations with naming opportunity, only single deduction is allowed if the donations was made before 1 Jan 2005. However, double deduction is allowed for donations with naming opportunity made on or after 1 Jan 2005. To encourage greater charitable giving in Singapore during the economic downturn, approved donations made during 1 Jan 2009 to 31 Dec 2009 will qualify for 2.5 times deduction. With effect from Year of Assessment (YA) 2003, any unutilised donations can be carried forward to set-off against the income for the subsequent YA up to a maximum of 5 years if there is no substantial change in shareholders. For more details on donations and tax deductions, please refer to Charities / IPCs.

How to qualify for tax deduction under the purview of business expenses? Business expenses

Answer: Generally, you can claim deduction for expenses that are wholly and exclusively incurred in the production of income. To qualify for tax deduction, the expenses must also satisfy the following conditions:

  • The expenses must be revenue in nature, (generally refers to the normal day-to-day operating expenses). Capital expenditure is not allowable as a tax deduction.
  • The deduction must not be prohibited under the Income Tax Act.
  • The expenses must be incurred. Contingent liability is not allowable as a tax deduction.
Deductible expensesNot deductible expenses
Accounting fee Administrative expenses Advertisement Auditors’ remunerationAmortisation
Bad debts (trade debtors) Bank charges Book-keeping servicesBad debts (non-trade debtors)
Commission CPF, skill development levy, foreign workers’ levyCPF contributions (Voluntary*) Certificate of entitlement (COE) for motor vehicles**
Directors’ fees Directors’ remunerationDepreciation (you may claim capital allowances)Donations
Entertainment Exchange loss (trade and revenue in nature) Exhibition expensesEntrance fee (country club or other clubs) Exchange loss (non-trade or capital in nature)
Fixed assets written off Fixed assets acquisition cost Fines
Goodwill payment
Impairment loss on trade debts Insurance (e.g. fire, workmen compensation) Interest expensesImpairment loss on non-trade debts Income tax Installation of fixed assets Insurance (certain life insurance) Interest expenses (interest adjustment)
Legal and professional fees (trade and revenue transactions)Legal and professional fees (non-trade or capital transactions
Medical expenses (restricted to 1% of total remuneration) Motor vehicle expenses (goods / commercial vehicles, e.g. van, lorry and bus)Medical expenses (amount exceeding 1% of total remuneration) Motor vehicle expenses (“S” plate private passenger cars)
Office upkeep
Periodicals & newspapers Postage Printing & stationery Property tax Provision for bad and doubtful debts (specific)(note impairment loss on trade debts) Provision for obsolete stocks (specific)Penalties Preliminary expenses Private and domestic expenses Private hire car Provision for bad and doubtful debts (general)(note impairment loss on trade debts) Provision for obsolete stocks (general)
Rental of business premises Repairs and maintenance Restoration costs (according to tenancy agreement) Research and developmentRenovation or refurbishment works (you may claim Section 14Q deduction for qualifying expenditure incurred from 16 Feb 2008 to 15 Feb 2013)
Secretarial fees Staff remunerations (salary, bonus and allowances) Staff training Staff welfare/benefits Stock obsolescence
Tax fees (service fees paid to tax agent) Telephone Transport (public transport and goods / commercial vehicles) TravellingTransport (“S” plate private passenger cars)
Wages Water & electricity

  *Voluntary CPF contributions refer to CPF contributions exceeding the statutory rate and CPF contributions for foreign employees holding professional visit pass, employment pass or work permit **If the vehicle qualifies for capital allowance (goods / commercial vehicle), you can include the cost of COE to the cost of vehicle and claim capital allowance Section 14Q deduction for expenditure incurred on renovation or refurbishment works Currently, capital expenditure incurred on renovation or refurbishment works (R&R costs) carried out on the business premises is not allowable as a tax deduction (unless the R&R costs constitute expenditure on repairs or replacements with no element of improvement). Such R&R costs also do not qualify for capital allowances (unless they form part of an industrial building which qualifies for industrial building allowances) because they are incurred in relation to the business setting within which the business is carried on and not on the provision of “plant or machinery”. To help businesses, particularly small and medium enterprises, reduce their business costs, tax deduction will be granted on all qualifying R&R costs incurred during the period 16 Feb 2008 to 15 Feb 2013 under Section 14Q of the Income Tax Act. Under Section 14Q, the amount of R&R costs that will qualify for tax deduction is subject to an expenditure cap of $150,000 for every relevant three-year period, starting from the year in which the R&R costs were incurred and a deduction is claimed by the company. Section 14Q deduction must be claimed over three consecutive Years of Assessment (YAs), starting from the YA relating to the basis period in which the R&R costs were first incurred (i.e 1/3 of the R&R costs can be claimed each YA over the three consecutive YAs). Any amount of qualifying R&R costs, which are not claimed in the YA relating to the basis period in which they were first incurred, will not qualify for deduction in subsequent YAs. If your company permanently ceases business in any of the three YAs, it will not be allowed a deduction on the balance of the R&R costs. Special provisions for YAs 2010 and 2011 To encourage companies to refit their business premises during the current period of economic downturn, companies that incur qualifying R&R expenses in the basis periods relating to YAs 2010 and 2011 can claim such expenses over one year instead of over three years. The accelerated write-down from three years to one year will have a direct impact of reducing the income tax payable by companies, thereby easing the cash-flow pressures that companies may face. The cap of $150,000 for every relevant three-year period remains unchanged. Section 14Q deduction is to be deducted from the adjusted profit/loss after allowance has been made to other tax deductions. Any amount of Section 14Q deduction that could not be fully utilised will form part of the adjusted trade loss of the company. However, the unutilised Section 14Q deduction cannot be transferred under the group relief system. The adjusted trade loss (after deducting Section 14Q deduction) can be offset against other income of the company. The amount of unutilised trade losses, if any can be: – carried forward to offset against the company’s assessable income for future YAs if there is no substantial change in the shareholders and their shareholdings; or – carried back to the immediate preceding YA to be offset against the assessable income under the loss carry-back relief. For examples on how to compute Section 14Q deduction, please refer to the Annex to the e-Tax Guide “Deduction For Expenditure Incurred on Renovation or Refurbishment Works”

 What about buying Life insurance policies? Business expenses

Answer: If it is your company policy to buy insurance policies for the employees and the beneficiaries of the policy are the employees, the life insurance premiums paid are tax-deductible expenses as it constitutes as staff cost. (Please note that the life insurance premiums are taxable as employment benefits of the employees and these benefits must be declared in their Form IR8A) If your company is the beneficiary, the insurance premiums are not deductible unless they satisfy the conditions of a “keyman” insurance. For details on deductibility of “keyman” insurance, please refer to “Keyman” insurance: Deductibility of premiums – addendum to practice note 1993/IT/5 dated 25 Feb 1993 (100KB).

What about Motor vehicle expenses? Business expenses

Answer: Motor vehicle expenses incurred in respect of private passenger cars (S-plate cars) are not deductible for income tax purposes regardless of whether the cars have been used for business purposes (except where the company is carrying on business of hiring out cars or providing driving instruction). The deduction is specifically prohibited under the Income Tax Act. Reimbursement of employees’ S-plate car expenses incurred by employees for company’s business is also not deductible. However, if your company pays transport allowance to the employees as part of their remuneration package, the transport allowance is a deductible expense, as it is part of staff cost. (Please note that the transport allowance is taxable as part of the employment income for your employees) If you own Q-plate business passenger cars that were registered before 1 Apr 1998, motor vehicle expenses relating to these Q-plate cars are allowable but subject to a capping of: 35,000 _ __ x motor vehicle expenses relating to that vehicle Cost of vehicle Motor vehicle expenses for foreign registered cars used exclusively outside Singapore are deductible if the expenses are incurred for business purposes. For more details on deductibility of motor vehicle expenses, please refer to Changes in Tax Treatment of Motor cars consequent to Vehicle Tax Rationalisation (126KB). Private hire car With effect from 1 Apr 1998, private hire car expenses and hiring charges (SZ-plate or S-plate cars) and are not deductible for income tax purposes. Deduction is not allowed regardless of whether the hired cars have been used for business purposes, except where the company is carrying on business