If there’s one country where your business can thrive, it’s Singapore. In the past decade, the economic conditions there have been excellent. Whether you’re a local or foreign investor, Singapore is among the best places to run a company.

According to the Companies Act amendment from 2014, every company must go through a thorough audit to follow the guidelines. Some of the common forms are the statutory and the tax audit. To deal with a tax audit in Singapore, you must be aware of some fundamentals before filing for taxes. Read on to learn more about the process and whether you need professional accounting or bookkeeping services:

How does tax audit work?

Due to the COVID-19 pandemic, Singapore has sustained a prolonged economic recession that has caused considerable company deficits. In this regard, the government has dedicated almost S$100 billion to cushion the economic effects of the pandemic in 2020 alone.

Undoubtedly, the trend will likely continue in 2021. Therefore, the Singapore local tax authorities will keep a close eye on the tax landscape in the country. Ultimately, the focus on tax governance aims to address any tax leakages and raise the overall revenue.

Which companies can apply for tax audit exemption?

In the past, the ACRA excluded companies with annual revenue of $5 million from the auditing process. However, the Companies Act amendment from 2014 changed the criteria, introducing new requirements for audit exemption. In this regard, you must be aware of the concept for a small company. According to the ACRA website, a company must fulfil at least two of the criterion to fall into the category:

  • The firm must have annual revenue of $10 million or less;
  • The total gross assets must not amount to more than $10 million at the end of the financial reporting period;
  • The company mustn’t have more than 50 employees at the end of the financial year.

Keep in mind that some additional conditions may qualify firms that are part of a small group of companies. The former must meet at least two of the following criteria:

  • An aggregate turnover of SGD 10 million or less;
  • A balance sheet total of less than SGD 10 million at the end of the financial reporting period;
  • The average number of employees mustn’t be more than 50 for the same period;
  • Holding and subsidiary companies are eligible for audit exemption if they fulfil the requirements;
  • If you are unaware of your company’s eligibility, consult with an advisory or accounting company.

How to minimize the risk of a tax audit?

Usually, tax audits are serious issues that may get you in trouble. Since the government focuses on fighting tax fraud and evasion, expect penalties regardless of whether you have any criminal intents. Still, some precautions will ensure you don’t put your business at risk.

Ensure you file accurate financial records

According to the Income Tax Act and the GST Act, all companies must keep proper business records for at least five years. Typically, the IRAS may want to review them if needed, but that’s not necessarily the case.

File your annual taxes on time

Another crucial rule is always to file your annual income and GST taxes on time. Usually, the due dates for income are 30 November (for paper filing) and 15 December (for online filing). If you’re filing your GST taxes, the due date is one month after the end of the accounting period.

Either way, filing accurate financial information on time will reduce the chances of errors and, thus, tax investigations.

Disclose any past tax evasion behaviour voluntarily

Perhaps, you may have previously evaded taxes. In such cases, you should consider disclosing such behaviour voluntarily. The IRAS has a particular Voluntary Disclosure Programme under which you may receive a lighter penalty. To qualify for reduced fines, you must:

  • Make an accurate and complete voluntary disclosure;
  • File your voluntary disclosure in due time, usually before the IRAS orders a tax audit.

Cooperate with the IRAS

Perhaps, one of the key considerations is to cooperate with the IRAS and make a disclosure. When you pay or cooperate with the Revenue Agency, you will avoid further prosecution. Also, you may reduce the penalty rate by two times in place of prosecution.

Seek professional accounting service

Typically, audits can be pretty scary for business owners, especially when they have little knowledge of the matter. Given the current conditions, you should hire a professional accountant. That way, you’ll minimize the risk of owing more taxes than expected.

Other considerations

Of course, you should never forget that your chances of a tax audit are sporadic. Typically, the IRAS randomly performs investigations on companies and applies the case-by-case method to ensure proper coverage. Besides, the Agency is less likely to investigate companies that have been punctual and meticulous.

Also, keep in mind that a tax audit doesn’t necessarily mean you’re in trouble. In some cases, the Revenue Agency may want additional documentation. Sometimes, they may want a response to a particular item. Either way, the reason for the audit might be a simple legal procedure or a random decision. In such cases, it’s best to cooperate and offer your help to avoid unnecessary trouble.

Final Thoughts

Fortunately, JL Accounts provides an expansive range of accounting services related to tax audit services. The company’s experts will ensure your company keeps proper tax records and files all annual taxes on time. As a result, you’ll eliminate the administrative burden and avoid tax investigations in the future.

Contact us if you need professional help regarding accounting, GST or tax-related issues. We also provide additional help such as GST audit services, GST filing, litigation support and company incorporation services.