The corporate tax filing season is under way and the clock's ticking.
All companies must e-file their corporate income tax returns for Year of Assessment 2017 by Dec 15. If they file via paper, the deadline is Nov 30. This includes entities that have not carried out any business activities in the financial year or are in a loss position.
To reduce compliance costs, the annual revenue threshold to qualify for filing Form C-S (a simplified three-page form) has been raised to $5 million from $1 million in this assessment year.
Firms that file Form C-S do not have to submit financial statements and tax computations, unless requested by the Inland Revenue Authority of Singapore (Iras).
From June next year, Iras will adopt CorpPass as the login method for businesses accessing all its e-services. Transition information packages will be sent out to companies by March.
While companies tend to be careful in tax filing, mistakes do crop up.
Iras recovered nearly $97 million in tax and penalties from its compliance review programmes on firms in the 2016 assessment year. It conducts regular compliance program-mes with a focus on taxpayers who pose higher risks of non-compliance.
Recently, Iras checks on the construction industry found that some companies applied incorrect income recognition methods for projects. This had the effect of delaying the reporting of taxable profits to a later year of assessment.
Iras said it will continue to work with the Singapore Contractors Association to conduct seminars and highlight the tax compliance findings to members. The Sunday Times highlights five common mistakes for companies to avoid.
1. Wrongful claims for tax deduction on renovation and refurbishment (R&R) works.
Firms are urged to claim only for qualifying R&R costs. They can claim over three consecutive years of assessment, starting from the year R&R costs were incurred. The expenditure must not exceed the $300,000 cap for every three-year period.
2. Tax deduction claims for non-deductible expenses
Note that private expenses are not tax-deductible. In addition, provisions for expenses are generally not tax-deductible unless your firm has legal liability to pay for such expenses.
3. Wrong claims under the Productivity and Innovation Credit (PIC) Scheme
Firms can claim either PIC cash payout or tax deduction on the same PIC-qualifying expenditure. Duplicate claims are not allowed.
Also, ensure that your equipment is on the PIC IT and automation equipment list.
4. Insufficient or incomplete records
Proper records and accounts of business transactions should be kept for five years from the relevant year of assessment.
5. Wrong method of recognising income for tax
Construction firms should apply the "percentage of completion" method to report taxable profits progressively for tax reporting instead of recognising income for tax purposes only when a minimum percentage of completion is attained for the project.
Companies that fail to file or report accurately face severe penalties, involving fines or even a jail term.
Firms failing to file returns for a particular year of assessment for two years or more may face a penalty of double the tax assessed and a fine of up to $1,000.
In default of payment, a prison term of up to six months may be imposed.
Companies that submit incorrect returns may face a penalty of up to 200 per cent of the amount of tax undercharged. A fine of up to $5,000 or imprisonment of up to three years may also be imposed.
Disclosure or reporting of errors
Firms that have made errors in past tax returns are encouraged to come forward as soon as possible.
Iras said: "We are prepared to accord a zero or reduced penalty treatment for voluntary disclosures which meet the qualifying conditions under the Voluntary Disclosure Programme."
Getting assistance Multiple channels of assistance are available, including a dedicated Corporate Tax Filing Season 2017 webpage (www.iras.gov.sg/irashome/CorporateTax2017/) that provides essential information and useful filing tips, and corporate tax filing seminars.
Companies can also make use of the Basic Tax Calculator or third-party solutions to help with their tax computations when filing their tax returns.