IRAS conducts regular GST audits to encourage voluntary compliance and ensure every taxpayer pays their fair share. We use a risk-based approach to identify key compliance risks and tailor specific programmes for higher-risk industries.
IRAS is currently focusing audits on 4 main areas:
- Missing Trader Fraud arrangements
- Businesses making low-value GST refund claims
- Sale of non-residential property
- Under-declaration of supplies by sole-proprietor
You are encouraged to review the audit areas below to understand the common errors identified, what you should do to avoid them, and the potential consequences of non-compliance.
Missing Trader Fraud Arrangements
Missing Trader Fraud is a fraudulent scheme used by syndicates to defraud the government. Singapore does not condone Missing Trader Fraud (“MTF”) arrangements and takes a serious view of such arrangements, as they pose a significant threat to public revenue.
IRAS conducts extensive audit checks and investigations on businesses and individuals suspected to be involved in such arrangements.
What you should do
You should conduct proper due diligence on your business dealings and carefully scrutinise the legitimacy of your purchases to avoid being drawn into Missing Trader Fraud arrangements.
Please refer to our webpage on Audits and Investigation on Missing Trader Fraud Arrangements and the e-Tax guide "GST: Guide on Due Diligence Checks to Avoid Being Involved in Missing Trader Fraud" (663KB, PDF). These provide more information on MTF, including the steps you should take to avoid being drawn into such arrangements, as well as how you can report malpractices to IRAS.
Consequences of involvement
- You will be subject to detailed audit and investigation.
- Your GST refunds may be withheld by the Comptroller if there is reasonable suspicion that the refunds relate to input tax on supplies that were part of a MTF arrangement.
- You will be denied input tax on your purported purchases because the claims do not meet requirements under sections 19 and 20 of the GST Act or under the Knowledge Principle.
- You will pay penalties and a 10% surcharge on the amount of input tax claims denied if you should have known that your purchases were part of a MTF arrangement.
- You may be liable to imprisonment and fine under section 62C of the GST Act:
a) Up to 10 years imprisonment and a fine of up to $500,000 upon conviction, if you are found to be a mastermind, co-conspirator, or syndicate member participating in MTF arrangements
b) Up to 12 months imprisonment and a fine of up to $50,000 upon conviction, if you are a current or former sole-proprietor, partner, or director of business entities used in MTF arrangements
Businesses making low-value GST refund claims
IRAS has embarked on an audit programme focusing on GST-registered businesses that claim low-value GST refunds, to ensure compliance with GST rules and that such refund claims are legitimate.
During audits, IRAS may carry out the following:
- Visit the business premises to verify business operations and activities and to review documents and records
- Interview key personnel(s) to understand the business arrangements and transactions
- Require businesses to review past GST returns and disclose any errors found.
What you should do
Review your records to ensure that your refund claims satisfy the conditions for claiming input tax and that you have not made errors commonly made by businesses, such as:
- Dormant businesses making input tax claims in the absence of taxable supplies
- Input tax claims not supported by tax invoices / import permits addressed to the businesses or simplified tax invoices
- Input tax claims made on disallowed expenses e.g., motor car expenses, medical expenses
- Input tax claims made on private expenses (e.g. food & beverages expenses for family, utilities or maintenance fees for residential properties). GST-registered businesses should note that even if you operate your business from home, you are not allowed to claim input tax on expenses related to housing as they are considered personal in nature
- Zero‑rated supplies relating to the export of goods that are not supported by proper export documents
Case study 1:
Company ABC operates business from a residential premise and has made input tax claims on household expenses such as utilities, phone charges, residence maintenance fees. As such expenses are predominantly personal in nature, IRAS has disallowed the input tax claims, even though the business is being operated from home.
Case study 2:
Company XYZ makes zero-rated supplies relating to the export of goods to overseas customers. However, the company is unable to provide proper supporting export documents. In the absence of proper export documents, IRAS is not satisfied that the goods are indeed delivered out of Singapore. Therefore, IRAS has standard-rated the zero-rated supplies and recovered the GST based on the prevailing GST rate.
Consequences of errors
Businesses found to have submitted incorrect GST returns may be penalised up to two times the amount of tax undercharged and may also be liable, upon conviction, to a fine of up to $5,000 and/or imprisonment of up to 3 years under Section 59 of the GST Act.
Sale of Non-Residential Property
IRAS audits businesses that sell non-residential properties. GST-registered businesses selling business assets, including non-residential properties, are required to charge and account for GST based on the consideration received.
What you should do
Review your records to ensure that you have accounted for GST correctly on the sale of non-residential property. The timing for accounting for GST depends on the type of payment received:
| Payment type | When to account for GST |
|---|---|
| Option fee and deposit | Earlier of:
|
| Remaining sum | Earlier of:
|
You should be aware of and avoid making the following common mistakes when accounting for GST:
| Common mistakes | Correct treatment |
|---|---|
| Not charging GST on the sale of non-residential property or omitting the output tax in the GST returns. | You must charge and account for GST when you sell non-residential properties that are part of your business assets. |
| Account for GST on option fees only when the option is exercised or when the sale completes. | You must account for GST when the fee is received or when the invoice for the option fee is issued, whichever is earlier. |
| Not accounting for GST on the transfer of properties where no consideration is received. | A GST-registered business has to account for GST on the transfer of the property even when no consideration is received, if it had previously claimed input tax on the purchase of property. |
| GST-registered sole-proprietors and partnerships do not charge and account for GST on non-residential property sales because they do not regard properties as business assets. | You must charge and account for GST if:
|
Consequences of errors
Businesses that submit incorrect GST returns may be penalized up to two times the amount of tax undercharged and may also be liable, upon conviction, to a fine of up to $5,000 and/or imprisonment of up to 3 years under Section 59 of the GST Act.
Under-declaration of supplies by sole-proprietors
IRAS is auditing GST-registered sole-proprietors who have not accounted for the correct amount of supplies and output tax in their GST returns.
What you should do
Some sole‑proprietors may mistakenly believe that only one of their businesses is subject to GST, or that certain income streams are personal and therefore not taxable. Review all your income streams and GST returns to ensure that you have accounted for GST correctly on all taxable supplies.
As GST registration is made under your name, you must charge and account for GST on all of the following:
- Taxable turnover of all your sole-proprietorship businesses
- Sale and lease of non-residential properties, or sale and lease of furniture and fittings in residential properties, if you are in the business of selling or leasing properties
- Any other taxable turnover from your trade, profession, or vocation as a self-employed person
The under-declaration of supplies and output tax in your GST return could be due to the omission or under-reporting of:
- Sales from all other sole-proprietorship businesses
- Taxable turnover from any other trade, business, profession or vocation carried on as a self-employed person (taxi or private hire car driver, hawker, property agent, insurance agent, multi-level marketing agent, freelancer such as fitness instructor, bookkeeper, accountant with own practice, etc.)
- Income from the sale and lease of non-residential properties, or lease of furniture and fittings in residential properties, where properties are business assets or you conduct a property business1.
- Proceeds from disposal of assets where input tax was claimed on purchase
1You are conducting a business in the leasing or sale of properties if you satisfy the business test set out in Paragraph 6.3 and 8.1 to 8.4 of the e-Tax guide “GST: Guide for Property Owners and Property Holding Companies”.
Consequences of errors
Sole-proprietors who submit incorrect GST returns may be penalized up to two times the amount of tax undercharged and may also be liable, upon conviction, to a fine of up to $5,000 and/or imprisonment of up to 3 years under Section 59 of the GST Act.