The following article covers common mistakes that businesses may often overlook when filing their income tax returns and what measures to follow to avoid them.
If you discover any errors now, it is advisable to conduct a review of prior YAs as well and disclose them to IRAS as soon as the information collated is complete.The disclosure can only goas far back as YA2016 since tax matters before that are time-barredas of 31stDecember 2019.The sooner the disclosure is made to IRAS, the lower the penalties are under the Voluntary Disclosure Program (“VDP”).
Under VDP, IRAS aims to encourage taxpayers to voluntarily come forward to report and correct their past errors in exchange for reduced penalties. The conditions are that the VDP must be timely, accurate, complete and self-initiated, i.e. before IRAS questions you on the same matter/issue. The VDP applies to income tax, GST, withholding tax and stamp duty.
To avoid IRAS queries, it is recommended to carry out a voluntary disclosure to IRAS. For example, a self-initiated disclosure of awrongful claim of non-deductible expenses leading to S$15,000 in incremental income taxes over past 3 YAs 2017 to 2019 may result in a much lower penalty of S$1,500 as opposed to 100% to 200% penalties of S$15k to S$30k.It pays to disclose the errors sooner than later as the penalties increases by 5% for every YA, i.e. 0% penalties for YA2019, 5% for YA2018 and 10% for YA2017 in taxes underpaid if the VDP is submitted to IRAS before 30 Nov 2020. Else, another 5% penalty is added to each of the YAs involved.
All materials have been prepared for general information purposes only. The information presented in this document is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice. Professional advisory should be sought before taking or refraining from any action as a result of the contents of this document.