Singapore Income Tax Notes

Introduction to Singapore Income Tax

Lecture Outline

• Types of Taxes
• Overview of the Income Tax Act (ITA)
• Basis of assessment
• Persons chargeable
• Tax administration in Singapore, assessment & collection of taxes
• Offences and penalties imposed by IRAS (Inland Revenue Authority of Singapore) & the voluntary disclosure program

Part I: Singapore Tax Administration

• Role of Inland Revenue Authority of Singapore (IRAS)
  • Agent for the Government.
  • Assess, collect and enforce payment of taxes.
  • Administers various Acts e.g., Income Tax Act.

Types of Taxes in Singapore

• Direct taxes
  • Income tax (Income Tax Act, Cap. 134, Economic Expansion)
  • Incentives (Relief from Income Tax) Act, Cap. 86)
  • Property tax (Property Tax Act, Cap. 254)
• Indirect taxes
  • Goods and services tax (Goods & Services Tax Act, Cap. 117A)
  • Custom / excise duty (Customs Act Cap. 70)
• Other taxes
  • Stamp duty (Stamp Duties Act, Cap. 312)
  • Casino tax (Casino Control Act, Cap. 33A)

Further insight into Taxes

• Individual Income Tax
• Corporate Income Tax
• Property Tax
• Goods & Services Tax (GST)
• Stamp Duty
• International Tax
• Withholding Tax

Revenue collection in FY 2023/2024

• Source: IRAS Annual Report FY2023/24

Overview of Income Tax Act

• Main legislation
• Subsidiary legislation (i.e. rules and regulations)

Basis of Assessment

• Tax is assessed on preceding year basis.
• “Year of assessment” or YA
  • Definition provided under section 2
  • Commonly referred overseas as fiscal year, tax year or assessment year.
  • Calendar year i.e., runs from 1 January to 31 December annually.
• “Basis period”
  • Definition provided under section 2
  • The period on the profits of which tax for a particular year of assessment falls to be assessed.

Examples of Basis Periods

• Based on Different Financial Year Ends
• The financial year end is determined by your company based on what best suits its business operations. IRAS does not determine the financial year end for companies.

Persons Chargeable

• Individuals (e.g., employed, self-employed, sole proprietors)
• Companies
• Trustees
• Clubs and associations
• Hindu joint families
• Note: Partnerships, limited partnerships (LP) and limited liability partnerships (LLP) are not taxable entities!
  • They are regarded as “tax transparent”, which means that the income will be taxed in the hands of each partner as his share of income from the partnership at his relevant income tax rate.

Returns: Broad overview of corporate tax filing cycle

• Within 3 months from accounting year end
• ECI Notice by Gazette
• Notify IRAS if not received by May
• Receipt of tax return e-filing notification letter
• By 30th November
• With audited accounts and supporting tax computation
• Payment by installments?

Returns: Broad overview of individual tax filing cycle

Income Tax Returns

• Types of tax returns:
  • Company
  • Individual
    • Tax resident – Form B1
    • Self-employed – Form B
    • Non-resident – Form M
  • Partnership – Form P
  • Estate / Trust – Form T
  • GST – GST F5

Assessments and Objections: Overview

• Risk-based approach to tax assessments:
  • Companies are profiled based on the complexity of their businesses and tax matters, and risk to revenue
  • Income tax returns are then segregated according to the complexities of their tax affairs

Companies with straightforward tax affairs:

• Detailed review on a year-to-year basis is not required
• The IRAS will accept the declarations in the income tax returns upfront with little or no adjustments
• Assessments are completed with NOAs generally issued by 31 May of the following year
• Compliance review – on small percentage of companies; query letter issued by 30 Sep of the following year

Companies with more complex tax affairs:

• Subject to more in-depth review of their yearly income tax returns
• Estimated NOAs issued by 28 Feb of the following year (E.g. NOA for YA 2025 by 28 Feb 2026)
• Enquiries or tax assessments may be made when the IRAS reviews the income tax returns subsequently
• Notices will be issued to the companies after IRAS review (to be received by 30 November of the second year. (E.g. NOA for YA 2025 by 30 November 2027)

Assessments and objections: Type of Notice of Assessment

Assessments and objections: Example Tax Bill

• Tax Reference Number:
• Date: 30 Apr 2025
• YEAR OF ASSESSMENT 2025
  • INCOME 75,000.00
  • DEDUCTIONS 7,500.00
  • CHARGEABLE INCOME 67,500.00
• TAX COMPUTATION
  • First 40,000.00
  • Next 27,500.00 @7%
  • Less 60% Tax Rebate (capped at $200)
  • Tax Payable by 30 May 2025

Assessments and Objections: Statue of Limitations or “time-bar”

• No additional assessment may be raised 4 years (from YA 2008 onwards) after the expiry of the YA Section 74(1)
• Not applicable to cases involving fraud or wilful default Section 74(2)
• Covers also assessment which results in any unabsorbed allowances or losses Section 74(4)

Assessments and Objections: Objection to Assessments

• Must be in writing stating grounds of objection Section 76(2)
• Due date for objection: 2 months Section 76(3a)
• Assessment is final and conclusive when no valid objection is lodged within due date (does not override section 74)
• Pay first, talk later (1 month) Section 84 Section 85(1)

Assessments and Objections: Objection to Assessments

• Source: IRAS e-Tax Guide on CIT – Objection and Appeal Process

Collections, recovery and repayment of tax: Tax collection mechanism

• Direct tax assessments [Section 76(1)]
• Appointment of collection agent [Section 57]
• Withholding tax regime [Section 45]

Offences and Penalties

IRAS’ Voluntary Disclosure Programme (VDP)

Qualifying conditions

The IRAS VDP applies to Income Tax (including cash payouts / bonus), GST, Withholding Tax and Stamp Duty. To qualify for IRAS VDP, you need to submit a voluntary disclosure that is:

• Accurate and complete; and
• Timely and self-initiated.

A voluntary disclosure is considered timely and self-initiated under either one of the following conditions:

• Before you receive a query from IRAS relating to your tax or cash payout / bonus matters; or
• Before you receive notification from IRAS on the commencement of an audit or investigation on your tax or cash payout / bonus matters.

After submitting a voluntary disclosure, you must also:

• Cooperate fully with IRAS to correct the errors made; and
• Pay or make arrangements with IRAS to pay additional taxes or amount exceeding cash payout / bonus than entitled to and penalties imposed (if any), and honour such arrangements till all payments are made.

IRAS’ Voluntary Disclosure Programme (VDP)

• Source: IRAS Voluntary disclosure of errors for reduced penalties