Introduction to Singapore T ax

Topics Covered:

• Different types of taxes in Singapore

• Overview of Singapore tax legislation (Income Tax Act)

• Basis of assessment

• Chargeable persons under the income tax

• Tax administration by the Inland Revenue Authority of Singapore (IRAS)

• Offenses and penalties administered by IRAS

Singapore Tax Administration

Inland Revenue Authority of Singapore (IRAS):

• Located in Novena, serves three primary purposes:

  • Acts as an advisor to the government on tax policy and economic measures.

  • Assesses, collects, and enforces tax payments to maintain fiscal stability and compliance.

  • Administers various tax acts and subsidiary legislations, ensuring alignment with international standards.

• Established in 1947, first year of assessment in 1948 collected 33,200,000 in revenue.

• Functions of Tax Collection:

  • Tax revenue finances national budgets and contributes to nation-building through public services and infrastructure.

  • Tax policies aim for compliance and support government initiatives such as social welfare programs and sustainable development goals.

Types of Taxes in Singapore

Direct Taxes:

• Income Tax: Levied on individuals and corporations, includes tax incentives like cash grants/lower rates for certain sectors, strategically encouraging investments in specified industries.

• Property Tax: Applicable to all residential and commercial properties, calculated based on the annual value of the property, incentivizing responsible property ownership and management.

Indirect Taxes:

• Goods and Services Tax (GST): Currently set at 9 ext{%}, impacting the consumption of goods and services, aimed at broadening the tax base and minimizing reliance on direct taxes.

• Customs Duties: Levied on imports, designed to protect local industries and generate revenue for the government.

Other Taxes:

• Stamp Duties: Imposed on property or share transactions, specifically aimed at regulating the property market and ensuring revenue generation from property transactions.

• Casino Taxes: Applied to casino operations, contributing to the national income while regulating gambling activities.

Resources for Tax Information:

• The IRAS website contains comprehensive categories of taxes and detailed taxpayer information, including guides on tax planning and compliance assistance.

Overview of Income Tax Act

• Main legislative framework for income tax is reflected in the Income Tax Act, providing detailed provisions for tax levies and exemptions.

• Other notable acts include the Company Act, Partnership Act, and VCC Act (Variable Capital Companies), which support the broader financial and corporate regulatory environment.

• Subsidiary legislation outlines specific rules for tax administration, allowing for flexible responses to changing economic conditions.

Basis of Assessment

Fiscal Year & Assessment Year:

• Singapore administers tax retrospectively, where the assessed period corresponds with the previous year's income.

• Individual assessments typically cover January 1 to December 31 (calendar year), ensuring taxpayers are informed of their obligations.

• Corporate assessments follow the fiscal year, which may vary per company depending on their business cycle, allowing for more accurate income reporting.

Chargeable Persons Under Tax Law

• Entities subject to taxation are categorized as:

  • Individuals: Taxed on personal income, including salaries, dividends, and gains from property.

  • Corporate Entities: Businesses assessed under company tax, each type having specific compliance requirements based on size and structure.

  • Trustees, Clubs, Associations, and Hindu Joint Families: Additional categories recognizing varied forms of income generation and distribution.

Tax Filing and Returns

Corporate Tax Compliance:

• Tax filing deadlines for companies include the Estimated Chargeable Income (ECI) due by March 31, with full tax returns due by November 30.

• Different forms of tax returns based on entity type (e.g., Form C for companies, Form B1 for individuals) ensure specificity in compliance.

Individual Tax Returns:

• Tax residents submit Form B1 to report personal income. Non-residents submit Form M, while partners utilize Form P and estates or trusts use Form T to account for specific earnings and considerations.

Assessments and Objections

Assessment Issuance:

• Notices of Assessment (NOA) are issued to detail tax liabilities based on the submissions. Entities must ensure accuracy in returns to prevent discrepancies.

• Entities can object to assessments; objections must be justified and submitted within two months of assessment issuance, thereby ensuring transparency in the appeals process.

Statute of Limitations:

• The IRAS cannot reassess after four years unless cases of suspected fraud are present, which upholds fairness in tax administration.

Tax Collection Mechanisms

• Direct Assessments: Taxpayers comply by reporting directly and settling tax bills timely, emphasizing taxpayer responsibility.

• Collection Agents: Utilized when taxpayers default; often banks may collect owed taxes, minimizing direct costs to the IRAS.

• Withholding Tax: Taxes deducted from payments made to non-residents by resident companies, an essential aspect of managing international business transactions.

Offenses and Penalties

General Offenses:

• Non-payment or late payment of taxes incurs fines and imprisonment depending on severity, fostering compliance.

• Voluntary Disclosure Program (VDP): Encourages taxpayers to self-report inaccuracies; offers reduced penalties for compliant behaviors, enhancing taxpayer trust and accountability.

• Fraudulent Behavior: Serious offenses, such as tax evasion, lead to higher penalties and criminal charges, reflecting stringent enforcement against tax-related crimes.

Conclusion

IRAS plays a critical role in maintaining tax compliance and ensuring taxpayers adhere to the laws set out in the Income Tax Act. Further information can be explored on the IRAS website, which offers resources for taxpayers to remain informed and compliant with their obligations.