Obligations of Taxpayers
To simplify the filing obligations for taxpayers, IRAS will pre-fill the following information for you:
- Your employment income from employers who participate in the Auto-Inclusion Scheme for Employment Income.
- Your rental details reported by you in the previous year, and/or from our e-Stamping records.
- Your reliefs based on the information received, or allowed to you last year.
It is your responsibility to ensure that your tax bill (i.e. Notice of Assessment) is accurate.
For taxpayers who are on the No-Filing Service Scheme, you can verify the details of your auto-included information on myTax Portal before previewing your tax bill by the filing due date. If the details are accurate, you may request an early finalisation of your tax bill. If the details are inaccurate, you can make the relevant changes by e-Filing your tax return by the filing due date.
Please inform IRAS within 30 days from the date of your tax bill if:
|You have any other income that is not shown in your tax bill.|
|You have changes in your relief claims.|
You can inform IRAS of any discrepancy through the “Object to Assessment” e-Service in myTax Portal.
IRAS' Compliance Focus
IRAS believes that taxpayers are generally compliant and that most non-compliance arises from negligence or insufficient understanding in tax matters.
IRAS calibrates our compliance approaches according to the compliance behaviour of taxpayers:
- For those who are voluntarily compliant, we provide support and assist them in fulfilling their tax obligations.
- For taxpayers who may be negligent in the filing of their tax returns, audits are carried out to detect and correct the errors.
- For the small group of errant taxpayers who deliberately evade taxes, we will carry out detailed investigations and take strong actions against them.
IRAS adopts a risk-based approach in carrying out our compliance programme. We identify and prioritise key areas of compliance risks; and develop targeted and customised programmes to tackle the different types of risk.
Areas of Focus for Individual Taxpayers
IRAS' compliance efforts are focused on self-employed individuals, who are persons carrying on a trade, business, profession or vocation. This can include doctors, dentists, lawyers, accountants, consultants, commission agents, private tutors, renovation
contractors, social media influencers and online sellers etc.
Compliance efforts have been placed on this group as statistics have shown that independent business operators tend to commit mistakes and file incorrect tax returns.
IRAS continues to focus compliance efforts on the following areas:
- Timely filing of income tax returns
- Under reporting of revenue and wrongful claims of purchases/expenses by cash-based industries
- Arrangements that constitute Tax Avoidance
- Reconciliation of income declaration with assets purchased
Timely filing of income tax returns
Currently, about 97% of individual taxpayers file their tax returns on time.
Given that the statutory record-keeping period has been reduced from seven to five years, and that filing of tax returns is an annual obligation, it is important that individuals file their tax returns promptly to ensure timely finalisation of their tax matters.
If you are on the No Filing Service (NFS), you are not required to file a tax return. However, if you have additional income to declare, or changes to make to your personal reliefs, you can make the relevant changes by e-Filing your tax return before the filing due date. Alternatively, please inform IRAS within 30 days from the date of the tax bill, if you have any income not shown in your tax bill or if your relief claims are incorrect.
Do note that late/non-filing of tax returns may attract penalties.
Under Reporting of Revenue and Wrongful Claims of Purchases and Expenses by Cash-Based Industries
Generally, we focus our compliance efforts on businesses and professionals who have higher levels of cash or paper transactions and poor record-keeping practices as they pose a higher non-compliance risk. Businesses and professionals with exceedingly high claims of expenses will also be scrutinised.
To aid these businesses and professionals to better comply with their tax obligations, we have put in place a series of compliance programmes ranging from educational and engagement activities to the conduct of audits to review the completeness and accuracy of tax reporting.
Arrangements that constitute Tax Avoidance
IRAS sees a growing trend of high income individuals seeking to avoid taxes through corporatisation, i.e. by setting up companies to book their personal service income. This is because the corporate income tax rate of 17% is 5% points lower than the top
marginal personal income tax rate of 22% from YA 2017, and companies can also benefit from the Start-up Tax Exemption Scheme (“SUTE”)/Partial Tax Exemption Scheme (“PTE”).
A tax avoidance arrangement normally involves an arrangement that is artificial, contrived or has little or no commercial substance. Such an arrangement is typically designed to obtain a tax advantage that is not intended by Parliament.
Some examples of tax avoidance arrangements observed by IRAS include:
- (i) Setting-up more than one company for the same business;
- (ii) Assigning income earned through personal efforts to a shell company; and
- (iii) Changing the business structure from sole-proprietorship/partnership to company for the sole purpose of obtaining a tax advantage.
The Comptroller will disregard and make relevant adjustments to arrangements which are carried out with tax avoidance as one of their main purposes and are not for bona fide commercial reasons.
For more information, you may refer to the circular (PDF, 453KB) that provides some case studies to illustrate common business arrangements that may give rise to tax avoidance concerns. It also lays out IRAS' approach in dealing with such business arrangements.
Reconciliation of income declaration with assets purchased
IRAS has been issuing query letters to individuals who have purchased high value assets, to check on their source(s) of funds for the acquisition.
The objective of the letter is to create awareness among such individuals to be more mindful of their personal income tax matters and also as a way to identify individuals who may not seem to have the income level to support these purchases.
IRAS may also inform such individual taxpayers to review their income declaration to ensure that they have duly declared all income.
Receiving Query or Review Letters
Receiving query or review letters from IRAS does not mean you have made a mistake. It means that you have either acquired high value asset(s) - property and/or vehicles, in recent years, or allowed your name to be used by others for the acquisition of the asset(s).
Obligation of Taxpayers
Upon receiving a query letter, you should reply to the query truthfully and let us know if you have omitted or under-declared any income.
You should also make use of this opportunity to do a thorough review of past declarations to ensure that all reporting are complete. Any voluntary and timely disclosure of omissions or errors in tax filing will result in a lower penalty.
Common Issues and Mistakes
Apart from engaging taxpayers who have made mistakes in their tax returns, IRAS keeps taxpayers informed of their tax obligations to aid their compliance with tax laws.
Here are some of the common issues and mistakes taxpayers are likely to make:
Reporting of Revenue
|No.||Common Errors||Getting It Right|
|1||Failure to keep proper records on the actual revenue and report revenue based on estimates.|
Taxpayers must maintain a full and complete record of income received.
Income can be recorded in two ways:
|2||Failure to report the full amount of revenue. Purchases and expenses were paid directly from the cash revenue, and the net amount was reported as revenue.||Takings that are used to pay for your purchases or expenses must be properly recorded and included in your reported revenue.|
|3||Failure to separate deposits made into personal and business bank accounts resulting in a lower amount of business income being reported.||Taxpayers should maintain separate bank accounts for business and personal purposes. The business income should be deposited into the business bank account only to facilitate an accurate reporting of business income.|
Failure to declare income derived from freelance or part-time work (e.g. fees from private tutoring, online businesses, driving private hired cars, blogging etc.)
|Taxpayers should declare such income under "trade, business, profession or vocation”.|
Claiming of Non-deductible Expenses
|No.||Common Errors||Getting It Right|
|1||Claims of private expenses like club membership subscriptions, entertainment, personal insurance, personal medical expenses, domestic utility and telephone charges, travelling expenses for personal trips etc. against the business income||Private expenses are not deductible for Income Tax purposes.|
Claims of motor vehicle expenses including petrol, insurance, repair and maintenance, parking and CBD charges etc. in respect of E or S-plate cars.
Note: If you are a self-employed chauffeured private hire-car (“PHC”) driver, please click here for more information.
|These expenses are specifically prohibited under the Income Tax Act and are not deductible even if they were incurred in the course of business.|
Keeping Proper Business Records
|No.||Common Errors||Getting It Right|
|1||Failure to keep proper business records and make declaration based on estimates.||
All claims for expenses should be based on actual amounts incurred and supported with invoices, receipts, payment vouchers or schedules.
Taxpayers are required to keep sufficient records for five years from the Year of Assessment (YA) from which the income relates, to enable their income and allowable deductions to be readily ascertained.
For example, business records for accounting period 1 Jan 2019 to 31 December 2019 (YA 2020) must be kept till 31 December 2024. We may request for these documents in the course of audits and disallow the expenses claimed or impose penalty if taxpayers fail to produce proper records.
|2||Disposal of business records once they have received their Notice of Assessment.|
Reporting of Other Income
|No.||Common Errors||Getting It Right|
|1||Failure to report other sources of income like director's fees and rental income, which are taxable.||All these sources of income are taxable and must be reported in your income tax return.|
Playing Your Part in Ensuring Everyone Pays a Fair Share of Taxes
• Keep Proper Business Records
Good record keeping is an important part of a business and is the first step towards achieving a complete and accurate income reporting.
To help taxpayers in improving their record keeping practices, IRAS has created a self-assessment toolkit to help businesses perform a self-review of their existing record keeping standards and to better understand the possible areas for improvement.
For non-GST registered businesses, please download the toolkit (XLSX, 25KB).
For GST-registered businesses, please download the toolkit (XLSX, 26KB).
You can also enhance and improve your record keeping practices by taking an e-learning course or/and by watching one of IRAS’ YouTube videos on record keeping.
Customised guides on IRAS’ website for self-employed individuals from specific business sectors and trades can also be found
• Conduct Regular Self-Reviews
Taxpayers are encouraged to conduct regular self-reviews to ensure that their past declarations were in order.
IRAS has developed a
self-review checklist (DOCX, 98KB) to guide taxpayers in identifying potential areas with reporting errors so that they can carry out an effective self-review and voluntarily disclose any errors/omission identified.
• Voluntarily Disclose Past Mistakes
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 omissions will be greatly reduced. For details, please refer to the
IRAS Voluntary Disclosure Programme.
• Report Tax Evasion
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
[email protected]. Your information will be kept confidential.
• Ask for Records
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 is paid in cash, you should ensure that you receive a payslip or a Form IR8A.
You can help ensure that every taxpayer pays his or her fair share of taxes through these various roles that you play.