Three common filing errors found from IRAS’s compliance reviews of companies

2 November 2015

On 29 October 2015, the Inland Revenue Authority of Singapore (IRAS) highlighted the list of three common filing mistakes found from last year’s compliance review of companies.

Common errors observed are as follows:

(1) Failure at maintaining proper records and accounts

Proper records should be kept for five years for future checks, even after the company has received its Notice of Assessment for the year. Failure to do so usually leads companies to understate sales, or overstate expenses in their tax returns.

(2) Claiming tax deduction on disallowed expenses or payments

Companies, especially family-owned businesses, often claim tax deduction on expenses or payments that are disallowed. These include personal expenses incurred by company directors, private motor car expenses specifically disallowed for tax deduction under the Income Tax Act and excessive payments to family members or related parties.

(3) Erroneous claim of tax deduction under the Productivity and Innovation Credit (PIC) Scheme

Businesses claiming 400% tax deduction or allowance on non-PIC qualifying equipment and PIC qualifying expenditure that has been converted to cash payout.

Taxpayers convicted under section 95 of the Income Tax Act for filing incorrect tax returns can face a penalty of up to 200% of the amount of tax undercharged. A fine up to $5,000 or imprisonment for up to three years may also be imposed.

Under the IRAS Voluntary Disclosure Programme however, penalties will be waived for qualifying companies who come forward to declare their mistakes within the grace period of one year beginning from the statutory filing date of 30 November. Voluntary disclosures made after the grace period will be subject to a reduced penalty rate of 5% per annum.

Source: IRAS