There are many potential errors to avoid when preparing a tax return. Corporate taxpayers in Singapore must promptly file their tax returns with the Inland Revenue Authority of Singapore (IRAS). Companies in Singapore are given sufficient time to prepare and file their corporate tax returns.
There are three types of forms for corporate tax returns: Form C-S (for Singapore-incorporated companies with annual revenue of $5 million or below), Form C-S Lite (for Singapore-incorporated companies with annual revenue of $200,000 or below) and Form C (for all companies that do not meet all the conditions for filing Form C-S or Form C-S Lite). It is greatly encouraged that strict compliance with the deadline is maintained, as these actions are subject to penalties from IRAS if neglected or not fulfilled.
In Singapore, corporate income tax returns are due by 30 November 2022 for the Year of Assessment (YA) 2022. Despite the tax-filing season right around the corner, errors in filing taxes in Singapore remain common and costly for employees and employers alike. Here are the four common pitfall areas that companies should take note of.
1. Foreign exchange differences
Gains or losses in foreign exchange are collectively referred to as foreign exchange differences.
One common mistake is claiming foreign exchange gains or losses incorrectly because a “designated bank account” DBA was used for capital transactions, such as the purchase of capital items (e.g., capital investments and fixed assets), the placement of fixed deposits, and the transfer of funds to another non-DBA.
Therefore, companies should ensure adequate controls and processes for identifying and categorising foreign exchange differences, especially DBA differences.
2. Incorrect Filing of Expenses
Most companies make the mistake of incorrectly filing expenses, including estimating expenses. Invoices and receipts are required to support claims for fees and the cost of sales.
Serial numbers should be included on invoices and receipts, along with pertinent information such as the date and company name.
3. Failure to Keep Proper Records and Accounts
Tax returns filed by companies with improper or inadequate record-keeping and accounting practices typically understate sales and overstate expenses. For transactions related to their business, companies must maintain accurate records and keep original documents. IRAS may assess a company’s tax based on available information if the company needs to keep sufficient records.
Even after the company receives its Notice of Assessment for the year, these records should be kept for five years for future checks.
4. COVID-19 related medical costs
While the Singapore government has been doing what they can for the public during the pandemic in 2020 and 2021, such as the GST guidance as support during COVID-19, heightened health measures has become ever more necessary. Personnel working in Singapore may be required to undergo swab tests (for example, mandatory testing on construction sites) or self-test antigen rapid tests (ARTs). Additionally, companies may have been required to provide employees with COVID-19-related medical insurance since COVID-19 restrictions have been eased.
Companies should remember that ART kit costs, swab test kits and COVID-19-related medical insurance for employees are deemed medical expenses. Therefore, when computing medical expense restrictions in tax calculations, companies should include such expenses.
Companies must ensure that tax returns are accurate, as penalties from IRAS will be implemented because of filing incorrect tax returns. To mitigate tax compliance risks, companies should evaluate their tax filings on an ongoing basis.
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*The above represents our views and opinions and does not necessarily reflect the position of any entities mentioned.