IRAS believes that taxpayers are generally compliant; most non-compliance arose from negligence or insufficient understanding in tax matters. IRAS takes a risk management approach in carrying out its compliance program. We identify and prioritise key areas of compliance risks and carry out different levels of compliance programs to tackle different types of risk.
IRAS compliance programs aim to:
Identify taxpayers who have made mistakes in their tax returns
Educate taxpayers on fulfiling their tax obligations and filing their tax returns correctly
Create an audit presence in the community to deter non-compliance by other taxpayers
Identify tax laws, policies and processes where we can simplify the tax system
Among the individual taxpayers, compliance efforts are focused on self-employed as we observed that being an independent business operator, they have a higher tendency of making mistakes and filing incorrect tax returns.
IRAS adopts a proactive approach in supporting and rendering assistance to the majority of taxpayers, who wants to meet their tax obligations but do not know how. We publish updates on our compliance efforts and provide information on our compliance focus and programs so as to raise awareness on how taxpayers could better meet their tax obligations.
On this page, we will share on:
Ongoing Compliance Focus for Individual Taxpayers:
IRAS continues to focus compliance efforts on self-employed taxpayers, by providing timely education and carrying out audit activities in the following industries:
We collaborate with relevant stakeholders such as industry bodies and associations to enhance tax compliance and good record keeping through tax seminars, educational letters and starter guides.
IRAS collaborated with the Association of Employment Agencies and conducted a customized seminar for 80 maid agencies. At the seminar, we shared the common mistakes made by maid agencies, the correct way of reporting their income as well as proper record keeping practices.
To raise the tax compliance standards of the medical profession, we have collaborated with the Singapore Medical Association (SMA) to organise seminars since 2009 to highlight the common tax filing errors made by the doctors. In addition, articles with information such as tax treatments of medical practitioners’ income and expenses were also published in SMA’s e-newsletters.
IRAS also conducted record keeping review visits to the medical practioners’ clinics. During such visits, our tax auditors will observe taxpayers’ business patterns, internal controls and record keeping method. If improvements are required, the auditors will provide the necessary feedback and assistance to taxpayers. A revisit will be conducted a few months later to ensure that taxpayer has made an effort to raise his record keeping standards. Some medical practitioners also received our educational letters highlighting the common mistakes made by taxpayers in the industry and tips on proper record keeping. Through these educational efforts, we hope to reach a sizable number of medical practitioners to enhance their understanding of tax matters.
Beauty & Wellness Operators
In 2010, we conducted 7 seminars to a total of 264 operators in the Wellness industry. In May 2011, we also collaborated with Spa Association to give a seminar on tax obligations and proper record keeping. During these seminars, we invited participants to sign up for our industry visits program whereby our tax auditors will visit taxpayer’s premises to give advice on their controls and record keeping system. We have customised a starter guide for the Beauty & Wellness industry so as to help the beauty & wellness operators to understand their tax and record keeping obligations better. This guide was disseminated to participants during the seminars and is also available on IRAS website.
In addition, we also sent educational letters to 50 beauty & wellness operators. Through these letters, we encouraged these operators to do a self-review of their accounts and tax returns. 45 operators took up this opportunity and voluntarily disclosed the mistakes they have made in the past.
Arts & Collectibles Operators
In 2011, close to 400 educational letters were sent to arts & collectibles operators to educate them on the common tax mistakes made and proper record keeping practices. We also conducted a number of record keeping review visits where the tax auditors advised the operators on the improvements to be made so as to raise their record keeping standards.
Tuition Centre/Agencies Operators
We invited close to 4,000 industry operators to our tax seminars. About 600 operators signed up for the three sessions held in February 2012. A customised starter guide for the Tuition industry was also made available to the tuition centres/agency operators at these seminars and on IRAS website so as to heighten their understanding of the correct ways of reporting their income and the proper records to keep.
IRAS conducts audit activities on the selected compliance focus industries to review the accuracy and completeness of their tax reporting. In the course of audit, we discover that there are some common issues and mistakes which taxpayers are likely to make. We would like to highlight some of the common issues and mistakes here so that taxpayers would avoid making such errors.
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Common Issues and Mistakes Taxpayers should Take Note:
Some taxpayers made mistakes in declaring their revenue. Some common mistakes observed are:
Errors in totalling up revenue or income.
Reporting of takings (e.g. sales or service income) based on estimates.
Failure to keep proper records on the actual takings made.
Failure to report the full amount of income. Purchases and expenses were made directly from the takings, and the net amount was reported as income.
Failure to segregate deposits made into personal and business bank acconts resulting in lower amount of business income being reported.
Taxpayers must maintain a full and complete record of income received. Income can be recorded in two ways:
Takings that are used to pay purchases or expenses must be properly recorded and included in their reported income.
Taxpayers should maintain separate bank accounts for business and private purposes and ensure that the business income is deposited into the business bank account only. This will facilitate an accurate reporting of business income.
Many taxpayers were found not to have kept sufficient source documents and records to substantiate their claims on purchases of goods and expenses. In some cases, purchase and expense amounts were estimated without any valid basis. Taxpayers are reminded that they should keep proper documentation and records to substantiate their purchases of goods and expenses.
Some taxpayers made wrongful claims of private expenses like club membership subscriptions, entertainment, personal insurance, personal medical expenses, travelling expenses for personal trips etc. against their business income. Such expenses are not claimable for Income Tax purposes.
Some also made claims of motor vehicle expenses including petrol, insurance, repair and maintenance, parking and CBD charges etc. in respect of private-plate cars (E or S-plate cars). These expenses are specifically prohibited under the Income Tax Act and are not deductible even if these were incurred in the course of business.
Taxpayers should ensure that the non-deductible private expenses are not claimed against the business income for Income Tax purposes.
Some taxpayers paid excessive salary and bonus to related parties such as his or her spouse, parents, siblings, etc for services rendered in their businesses. They are reminded that salary and bonus paid should commensurate with the services rendered and should be in line with market rate (arms-length transaction). Payment or salary vouchers should be acknowledged and retained.
There are also instances whereby some taxpayers included salaries, allowances or CPF paid to related parties such as his or her spouse, parents, siblings, etc in their payroll when these related parties are not working for them. In such cases, salaries, allowances or CPF paid are not claimable for Income Tax purposes.
Some taxpayers have failed to keep and retain sufficient records to enable us to ascertain their income and allowable business expenses. Some have the misconception that they do not need to keep records or could discard their records once they have received their Notice of Assessments.
For income tax purposes, they are required to keep proper records and accounts of their business transactions for 5 years with effect from 1 Jan 2007. They can be penalised or denied claim of expenses if they fail to keep proper records.
The set of accounts and other records must be supported by proper documents, such as invoices, receipts, payment vouchers and statements, in order for IRAS to ascertain their income and allowable business expenses readily. The records should be retained for the requisite period whether or not the assessment has been raised. The Comptroller may request for these documents in their course of audits.
Some taxpayers may not report other sources of income such as rental income and director's fees in their Income Tax Returns. Under the Income Tax Act, these are taxable items and must be reported in the tax returns.
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Up and Coming Compliance Focus for Individual Income Tax:
IRAS' Compliance Focus for 2012 and 2013
For the coming year, IRAS will continue its compliance efforts on businesses in the Arts & Collectibles Industry and the Tuition Industry. We will also extend our compliance efforts to freelancers working in the Tuition Industry. Freelancers are self-employed individuals who works either work from home or for different people usually on a part time basis. IRAS will identify, work with and assist these freelance individuals on their tax matters so that they can better fulfil their tax obligations.
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Taxpayer's Role in Ensuring that Everyone Pays His/Her Fair Share of Taxes
- Voluntarily Disclose Past Mistakes
While IRAS believes that the majority of taxpayers are voluntarily compliant, we understand that some taxpayers could have committed tax errors due to their negligence or lack of understanding of their tax obligations. We encourage taxpayers who have made errors or submitted incorrect returns to come forward voluntarily in a timely manner, to disclose these errors or omissions and get their tax obligations right. By doing so, they may qualify under our Voluntary Disclosure Programme in which the penalty for such errors or ommisions will be greatly reduced. Please refer to the IRAS Voluntary Disclosure Program for more information.
We encourage members of the community to report suspected tax evasions. If you suspect a person or business is engaging in some transactions in order to evade their tax obligations, or you know of someone who is not complying with their tax obligations, you can let us know by writing or emailing to firstname.lastname@example.org. Your information will be kept confidential.
- Do your Part as a Taxpayer
As a consumer, you can request for a written contract, tax invoice or obtain a receipt on payment. This helps to ensure that businesses retain and keep some forms of records.
As an employee, if your salary are paid in cash, you should ensure that you receive a payslip or a Form IR8A.
You could help ensure that every taxpayers pay his or her fair share of taxes through these various roles you play.
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