IRAS – Getting Companies to Comply (Part 1 of 3)
IRAS employs a thorough strategy for overseeing companies’ tax compliance, utilizing a combination of risk-based and random audits spanning various industries to ensure broad coverage across the corporate spectrum. This involves the utilization of data analytics and other tools to assess companies’ compliance risk profiles.
IRAS continues to focus compliance efforts on these areas:
- Timely Filing of Corporate Income Tax Returns (Form C-S/ Form C-S (Lite)/ Form C)
Approximately 87% of corporate taxpayers submitted their Corporate Income Tax Returns for the Year of Assessment 2022 within the designated timeframe. Companies are allotted a window of either 11 months (for those with financial years concluding in December) or 22 months (for those with financial years concluding in January) to complete and submit their returns. This timeframe is deemed adequate for companies to meet their filing requirements. It is crucial for companies to promptly submit their Corporate Income Tax Returns to facilitate the timely resolution of their tax and financial affairs. Non-compliance with the deadline for filing the Corporate Income Tax Return constitutes a legal offense. IRAS is prepared to implement stringent deterrent actions against taxpayers, especially directors overseeing multiple companies, who fail to meet their tax return obligations on time.
- Claiming of Private or Non-Deductible Expenses
To qualify for tax deduction, expenses must be incurred solely for the purpose of generating income. This entails that these expenditures must be exclusively related to business activities and should not involve any personal or non-business elements, such as family meals, vacation expenses, or household groceries. Upon reviewing the data, IRAS observed that numerous family-owned enterprises were overseen by family members. The compensation disbursed to directors and their relatives, including children, appeared disproportionate to the services rendered. IRAS conducts routine audits on companies to verify the accuracy of their expense claims and to prevent any underreporting of taxes. Non-compliant companies may face penalties without hesitation from IRAS. Taxpayers are advised to thoroughly review their claims to ensure adherence to tax regulations.
- Classification of Income and Expenses for Income Taxable at Concessionary and Prevailing Corporate Income Tax Rates
A company may generate various income streams subject to different tax rates, including the standard Corporate Income Tax rate and concessionary rates. In IRAS assessments, we’ve noticed certain companies committing the following mistakes:
- Incorrect classification of non-qualifying income under the concessionary tax rate category
- Incorrect identification of direct and common expenses
- Adoption of inappropriate bases in the allocation of common expenses and capital allowances
Through IRAS ongoing compliance assessments, IRAS goal is to comprehend the measures and controls implemented by these companies to ensure accurate filing of their Corporate Income Tax Returns. IRAS also strive to offer guidance for enhancing their control mechanisms.
