All companies in Singapore are required to file their tax returns every financial year. This filing of tax returns serves as a basis for the government to determine the income, expenses, and other significant tax information about an individual or company. Tax filing is the duty of every taxpayer in the country. However, this process does not spare people and businesses from errors.
Taxpayers may commit errors in their tax returns from time to time primarily because of a lack of care or adequate awareness of their tax obligations. The Inland Revenue Authority of Singapore (IRAS) recognises the inevitability of this problem. Hence, it has created and established the Voluntary Disclosure Program (VDP).
Read on to understand more about this useful IRAS program.
What is IRAS VDP?
VDP is a self-rectification program established by IRAS to encourage taxpayers in Singapore who have committed errors in their tax returns to come forward voluntarily and rectify their mistakes in a timely manner. Under this program, both individuals and companies are urged to voluntarily disclose their declaration mistakes and omissions in exchange for reduced penalties. IRAS has come up with a system of minimising penalties for voluntary disclosures that meet the qualifying conditions.
What are the required conditions to qualify for VDP?
VDP applies to different kinds of taxes, including income tax, GST, withholding tax, and even stamp duty. However, the advantages of VDP are not readily available to all erring taxpayers. In order to qualify for VDP, certain requirements have to be satisfied. Particularly, IRAS requires that a voluntary disclosure must be accurate and complete as well as timely and self-initiated to qualify for the program.
A voluntary disclosure is said to be timely and self-initiated when it is done before the taxpayer receives an enquiry from IRAS regarding their tax, cash payout, or bonus matters. If the taxpayer voluntarily discloses their tax return errors before they receive notification from IRAS regarding the commencement of an audit or investigation of their tax, cash payout, or bonus matter, their disclosure also falls within the ambit of timely and self-initiated disclosures.
After submitting a voluntary disclosure, the erring taxpayers need to fully cooperate with IRAS in correcting the errors that they made. They also have to make arrangements with IRAS for the payment of additional taxes or amounts that exceed the value of cash payout or bonus that they are entitled to as well as any possible penalties imposed on them. The taxpayers are required to honour such arrangements until their full payments are made.
How are penalties reduced?
The imposable penalties on erring taxpayers who have voluntarily disclosed their tax return errors vary according to the period within which they have made their voluntary disclosure. If the taxpayer voluntarily disclosed their error within the one-year grace period from the statutory filing deadline, no penalty shall be imposed on them.
On the other hand, if the taxpayer’s voluntary disclosure is only made after the one-year grace period has already expired, they shall only be entitled to a reduced penalty, which shall be flat 5% of their GST undercharged or outstanding Withholding Tax and 5% of their income tax undercharged for every year the error was late in being corrected.
Why do businesses need GST ASK?
The danger of being investigated by the IRAS is real, and the repercussions of having mistakes or omissions detected through an audit can be expensive on the part of businesses. Aside from imposing interest and penalties, errors and omissions in tax filing can damage a company’s overall reputation. Over the recent years, the IRAS has increasingly strengthened its tracking and regulation of those taxpayers who evade tax or file incorrect tax returns by taking more serious actions and imposing heavier penalties.
Therefore, it has become more necessary than ever for taxpayers to become more careful and cautious about the correctness of their tax submissions. Common GST errors can be avoided when calculating GST with the GST ASK package and help from a professional firm that specialises in offering GST-related services. One of the best ways for businesses to ensure the accuracy and correctness of their tax submissions, particularly their GST, is to undertake the GST Assisted Self-help Kit (ASK).
GST ASK is an extensive self-assessment compliance package that helps businesses reevaluate the correctness of their GST submissions and identify previous errors early in order to qualify for IRAS VDP. This self-help kit may be adopted by GST-registered enterprises on a voluntary basis. However, for those businesses that are applying for or renewing a certain GST Scheme, such as Import GST Deferment Scheme, Major Exporter Scheme, or Approved Import GST Suspension Scheme, conducting GST ASK is compulsory.
Accuracy and correctness are two things that businesses should ensure in conducting their tax submissions. Having false, incomplete, or incorrect tax returns will not only cost a business some penalties, but it can also heavily affect its reputation. For this reason, programs and solutions, such as VDP and GST ASK, which assist taxpayers in identifying their mistakes and correcting them, are very much necessary. If you need any form of assistance regarding your GST, do not hesitate to contact us here at Max Lewis Pte Ltd. We provide highly trusted GST ASK for businesses.
Furthermore, we also deliver a wide variety of reliable services that can help you streamline and upscale your business operations. These include transfer pricing advisory, business and asset valuation in Singapore, valuation of intellectual property rights, and more. With our certified professionals and experts, we can surely help keep your business on the right track. Enquire with us today to learn more about our services.