An audit involves reviewing your income generating activities to ensure that the information in the tax return provided to us is accurate; for example, ensuring that your declarations of revenue or income is accurate. Our audits are conducted to assess the likelihood of risk. Being selected for an audit does not necessarily mean that you have made a mistake.
The objectives of our audit programme are to :
- Identify taxpayers who have made mistakes in their tax returns
- Create an audit presence in the community to deter non-compliance by other taxpayers
- Educate taxpayers on their tax obligations and how to comply
- Identify tax laws, policies and processes where we can simplify or clarify
On this page:
What can I expect during an audit?
How is an audit conducted?
Audits are conducted through an examination of your accounting books, records and financial affairs to verify that income tax returns submitted are in compliance with tax laws.
The examination of accounting books and records would usually be performed at your business premises. If the business premises is not suitable, e.g. due to space constraint, the audit may be conducted at IRAS office. We will inform taxpayers of the timing of audit by way of letter, email or telephone call before the visit is made. You will be advised on the Year(s) of Assessment to be audited and the types of documents or records to be reviewed. You may arrange for your accountant or tax representative to be present on the day of visit.
Audits are carried out by IRAS tax auditors. To enable taxpayers to identify our tax auditors, we carry special authority cards issued by IRAS, bearing the name and identification of the auditor. Should you require confirmation on the identity of the holder, please call IRAS on 6351 2044 or 6351 2046.
The types of documents or records reviewed include:
- Source documents that substantiate all transactions in your business, e.g. receipts, invoices, vouchers, and other relevant documents issued or received from customers/suppliers;
- Accounting records and schedules – manual or electronic records of assets and liabilities, revenue and expenses, gains (profit) and losses. Where accounting information is stored in electronic format, you are advised to make the information available on the date of visit;
- Bank statements of business bank accounts and personal bank accounts, if required;
- Any other records of transactions connected with your business.
Usually, the examination of accounting books and records would be conducted by a team of 2 to 4 tax auditors. We will begin the audit with an interview to gain better understanding of your business operations, accounting and internal control systems and your personal assets and liabilities, followed by an examination of the accounting books and records.
Depending on the standard of record keeping, the degree of compliance, the scope of audit and your level of co-operation, the visit may last from a few hours to a day. In the event that the requested information or records are incomplete or unavailable, the auditors might re-visit the business premises on another arranged date.
After the examination of accounting records and books, we will inform you of any errors/omissions and advise you on areas for improvements to better comply with your tax responsibilities. Some of your accounting records and books might be retained by auditors for further review.
In conducting further review, we may seek confirmation or obtain information from third parties. In the absence of sufficient records, we will refer to available sources of information to best estimate the financial conditions of your business. Expense claims or other claims, e.g. capital allowance, may be disallowed in the event of insufficient supporting documents. (mentioned in the conclusion of an audit)
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What does IRAS expect from taxpayers during an audit?
You are encouraged to:
- Allow full access to your premises, records and documents.
- Make available a room or working space for the auditors to perform the examination of books and records.
- Allow us to interview your employees.
- Allow us to make copies or obtain extracts of records and documents.
- Provide timely, complete and accurate replies to our requests for information in accordance to the time frame given.
- Be truthful and cooperative. Full disclosure of irregularities and omissions should be made at the earliest possible time.
Under Section 65B of the Income Tax Act, the Comptroller or any officer authorised by him has the power to obtain information. It is an offence for any person who fails to or neglects to comply without any reasonable excuse.
Under Section 98 of the Income Tax Act, it is an offence for any person to obstruct or hinder any officer acting in the discharge of his duty under the Income Tax Act. Any person guilty of this offence is liable to a fine of up to $1,000 and imprisonment of up to six months (in default of payment).
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What happens at the completion of an audit?
Depending on the standard of record keeping, the scope of audit and the support and co-operation of the taxpayer and his/her tax representative, the review of an audit case will usually take four months to a year to complete.
On completion of the audit review, we will inform you of the following in writing or through a meeting:
- Outcome of our audit findings.
Any contentious issues should be discussed to reach a mutually acceptable conclusion.
- Any adjustment to be made to your tax assessment(s) and basis of these adjustments.
- Issue of the Notice(s) of Additional/Amended Assessment
If you do not agree to the Notice(s) of Additional Assessment, objection must be made in writing within 30 days, stating the specific grounds of objection.
- Proposed penalty, if any
It is an offence to file an incorrect income tax return. If errors or omissions are discovered during the tax audit, penalties of up to two times the amount of tax undercharged may be imposed. In cases of fraud, penalties will be up to four times the amount of tax undercharged. Serious cases of errors may face prosecution.
- Issue of an Offer of Composition if penalty has to be imposed
The acceptance form to the offer of composition has to be signed and returned within 14 days.
- Any areas for improvement to enable you to better comply with tax laws in future
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What can I do to improve on my compliance?
- Engaging personnel with sound IIT knowledge (e.g. have attended IIT Courses conducted by the Tax Academy) and adequate experience
- Practicing good record-keeping
- Using computerised accounting system. If you are a GST-registered business, you are eligible for a subsidy for the purchase any of the accounting software listed in IRAS' Accounting Software Register. Please refer to Infocomm@SME - Accounting Software Assistance Scheme for details.
- Having good internal controls
- Conduct periodic reviews of your returns and to disclose any error voluntarily. For a start, you may go through the “List of Common Errors made”. Penalty can be reduced for voluntary disclosures which meet the qualifying conditions under IRAS’ Voluntary Disclosure Programme.
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Recent audit activities and results
We will not hesitate to take enforcement actions against non-compliant businesses.
Compliance programme on F&B Operators & Real Estate Agents
From our audits of 791 individuals comprising of F&B operators and real estate agents in 2008, we have recovered about $5.7 million taxes and penalties.
||Real Estate Agents
| No. of individuals audited
| Amount of tax recovered (including penalties)
Among those who were audited, the income under-declared ranged from $200 to $2.69 million per taxpayer. The largest amount of taxes recovered was $145,000 and $476,000 from a F&B operator and a real estate agent respectively.
| F&B Operators
| Real Estate Agents
1) Click here to look at recent prosecutions for Individual Income Tax.
2) For IRAS’ audit attention for years 2011 and 2012, please refer to Compliance Focus on Individual Taxpayers.