Starting this year, Taxpayers will be able to file their tax returns using their smartphone.
It is the time of the year for the filing of the individual income tax which runs from 1st March to 18 April.
Starting this year, Taxpayers will be able to file their tax returns using their smartphone.
The eligibility for tax reliefts and other filing details on the current tax season can also be accessed online and on smartphone at https://www.iras.gov.sg/irashome/TaxSeason2016/
E-Tax Guide on Director’s Fees and Bonuses from Employment and Deduction for Statutory and Regulatory Expenses
The IRAS has posted an updated e-Tax guide on the tax treatment on Director's Fees and Bonuses and a new e-Tax on the Deduction for Statutory and Regulatory Expenses on the 12th of September 2014.
The update for the tax treatment on Director's Fees and Bonuses updates paragraph 6.1 of the Income Tax Act (ITA) to clarify that a company may claim deduction for director’s fees and employees’ bonuses only when its liability to pay such fees and bonuses actually arises and also paragraph 7.1 of the ITA such that companies
need not submit the documents/information to IRAS but to prepare and retain them.
The e-Tax guide on the treatment of Statutory and Regulatory expenses disallows the following expenses for tax deductions. They are expense that is capital in nature; fine, penalty or composition amount in relation to a composition of an offence under any written law of Singapore or another country; expense to defend against charges of non-compliance with any statutory and regulatory requirement; and expense in relation to appeals to the courts or any quasi-judicial body (e.g. the Income Tax Board of Review)
For more information on the two e-Tax guides, please refer to the e-Tax guide below:
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Midas Promotions Pte Ltd (“Midas”), a sports and concerts event promoter, was ordered to pay about $786,000 in taxes and penalty and a court fine of $7,000 for failing to inform the Comptroller of Goods and Services Tax (“GST”) of its liability to register for GST.
Businesses with over $1 million annual sales must register for GST
Under the law, a business with annual taxable turnover exceeding $1 million must register for GST. A GST-registered business is required to charge GST on its sales and can offset the GST it pays on its purchases before it accounts for the net difference to IRAS.
Businesses are required to regularly assess whether they are required to be registered for GST. In most cases, a business must register for GST when the business’ taxable turnover for the past 4 quarters is more than $1 million, or when the business’ taxable turnover for the next 12 months is expected to exceed $1 million. Businesses need to register for GST within 30 days of the date on which their liability to register for GST arises.
How the Offence was Committed
IRAS’ investigations revealed that Midas’ taxable turnover already exceeded $1 million for the four quarters ending 30 Jun 2004, 30 Sept 2004, 31 Dec 2004 and 31 Mar 2005. It failed to inform the Comptroller of GST of its liability to register for GST within 30 days of the end of 31 Mar 2005, that is, by 30 Apr 2005.
Further checks conducted by IRAS with a ticketing company which provided services to Midas confirmed that the total value of all of Midas’ taxable supplies made in Singapore exceeded $1 million during the relevant period.
Consequently, a total GST amounting to $714,696.87 between 1 Jun 2005 and 30 Apr 2012 was not accounted for by Midas. In addition to paying the GST, Midas has to pay a penalty equal to 10% of the amount of the tax due. This amounted to $71,469.69. Midas was also fined $7,000 by the Court.
Penalties for Failure to Register for GST
IRAS reminds businesses to follow GST registration rules by closely monitoring their taxable turnover at the end of each quarter and ensuring that they promptly register for GST when their turnover exceeds $1 million per year. Regular audit programmes are carried out by IRAS to identify cases liable for compulsory GST registration.
Businesses failing to register for GST even though they are required to do so by law can be fined up to $10,000 and pay a penalty equal to 10% of the tax due from the date on which the business is required to register for GST. The business’ effective date of GST registration will be back-dated to the day that its liability to register arose. Consequently, the business will have to pay the outstanding GST on all its past transactions since the effective date of registration, even if this amount was not collected from its customers.
Reporting of Malpractices
Businesses or individuals are encouraged to immediately disclose any past tax mistakes. IRAS will treat such disclosures as mitigating factors when considering action to be taken. Those who wish to disclose past mistakes, reveal evaded taxes, or report malpractices that might indicate tax evasion, can write to:
Inland Revenue Authority of Singapore
Investigation & Forensics Division
55 Newton Road, Revenue House
IRAS will be disbursing the Wage Credit Scheme (WCS) payouts to employers for the wage increases for their employees in 2013.
The WCS helps employers co-fund 40% of wage increases given to Singaporean employees earning a gross monthly wage of up to $4,000 during the three-year period starting from the year 2013. It was introduced in the Singapore Budget 2013 to help businesses which may face rising wage costs in a tight labour market.
Over 74,000 employers will receive about $800 million in the first tranche of WCS payouts by 31 March 2014. Qualifying employers will receive a notification letter from the Inland Revenue Authority of Singapore (IRAS) by 31 March 2014, informing them of their total payout.
Employers may also check their eligibility at http://www.iras.gov.sg/irasHome/wcs.aspx from 21 March 2014 onwards. Appeal for the first tranche of payouts ends on 30 June 2014. IRAS will consider appeals on a case-by-case basis. Those who are successful in their appeals will be paid from June 2014 onwards.
Following the Budget 2014 announcement, here are some of the notable tax changes.
Extension of Productivity and Innovation Credit (PIC) Scheme
To give businesses more time and certainty to put in place productivity improvements, the PIC scheme will be extended for three years till YA 2018.
For enhanced tax deductions, the expenditure cap of $400,000 per qualifying activity per YA can be combined across YA 2016 to YA 2018 (i.e. $1.2 million per qualifying activity).
For PIC cash payout, the expenditure cap of $100,000 per YA for all six qualifying activities cannot be combined across the three YAs, as is the case currently.
The PIC+ Scheme is introduced to provide support to Small and Medium Enterprises (“SMEs”) who are making more substantial investments to transform their businesses.
Under the PIC+ scheme, the expenditure cap for qualifying SMEs will be increased from $400,000 to $600,000 per qualifying activity per YA. This means that these SMEs that invest beyond the current combined expenditure cap of $1.2 million for each qualifying activity can claim 400% enhanced tax deduction on an additional $200,000 of qualifying expenditure.
PIC+ will take effect for expenditure incurred in YA 2015 to YA2018. The combined expenditure cap will be up to $1.4 million for YA 2015, and up to $1.8 million for YA 2016 to YA 2018.
The expenditure cap for PIC cash payout will remain at $100,000 of qualifying expenditure per YA.
IRAS will release further details by end Mar 2014.
Refining the three-local-employees condition for PIC cash payout
With effect from YA 2016, businesses applying for PIC cash payout will have to meet the three-local-employees condition for a consecutive period of at least three months prior to claiming the cash payout.
Streamlining Stamp Duty Rates for Share Transfers and Mortgages
Stamp duty rates for share transfers and mortgages will also be streamlined for transactions executed on or after 22 Feb 2014
Transfer of stock or shares - 0.2% of the purchase price or market value of the stock or shares transferred, whichever is higher
Mortgage instruments - 0.2% or 0.4% of the relevant amount (depending on the type of mortgage instrument) subject to maximum duty of $500
Good news to all companies that plan to utilise the government's Productivity and Innovation Credit Scheme. Following the release of the Budget 2014, the Inland Revenue Authority of Singapore (IRAS), revised its Productivity and Innovation Credit (PIC) IT and Automation Equipment List to include Website, Automated cover system for open-top containers and Landscaping equipments.
This means that businesses can now claim enhanced deduction for expenses incurred for the 3 items without the need to write in to apply.
Expenditure for these items incurred from YA 2014 will be eligible for the PIC. If you have already submitted your PIC Cash Payout Application for YA 2014, you could try to write in to IRAS to have any expenditure included.
You can see the full list at the IRAS PIC IT and Automation Equipment List.
For a list of landscaping equipment, you can go to the PIC Landscape Equipment List.
A company director was charged for submitting a false Productivity and Innovation Credit (PIC) claim in order to obtain cash payout of $60,000 for his company.
Director made false PIC claims
Alex Rajan made a false declaration in a PIC cash payout application form that EMTPL had purchased PIC automation equipment for $168,000 and that his company met the qualifying conditions for the cash payout.
IRAS’ investigations revealed that EMTPL did not incur such expenditure on the equipment. The company also did not employ or make CPF contributions for at least three local employees in the relevant period. In fact, EMTPL had never been in active business operation.
Mr Alex Rajan s/o Anthony Samy (“Alex Rajan”, 47), director of Exel Mitsui Technologies Pte Ltd (“EMTPL”) which manufactures machine tool accessories, was charged for making false PIC claims by the Courts on the 14 February 2014. Alex Rajan pleaded guilty to the charge and will be sentenced on 21 February for the offence. Meanwhile, the court has ordered EMTPL to pay a fine of $8,000 and a penalty of $180,000.
This is the second case of a director and its company to be charged for making false PIC claims. IRAS had earlier charged Greenit Pte Ltd, a computer equipment and hardware wholesaler and computer memory modules distributor, and its director Khoo Tzyh Shin for fraudulently claiming a PIC cash payout.
IRAS takes a serious view of any abuse of PIC Scheme
IRAS takes a serious view of taxpayers who defraud the government. Offenders convicted of PIC fraud will have to pay a penalty of up to four times the amount of cash payout fraudulently obtained, and a fine of up to $50,000 and/or imprisonment of up to five years.
Examples of what IRAS regards as abuse of the PIC scheme are as follows:
a) Claiming PIC using false records or documents, where no such expenditure was incurred or where the actual amount incurred was lower.
b) Creating a shell company to make PIC claims on purchase of equipment from a related company, where no such purchases were made and where the automation equipment continue to be owned and used by the related company.
c) Claiming PIC based on collusion with a third party to purchase automation equipment, when the selling party is not the legal owner of the equipment and was merely renting or leasing it.
d) Using phantom employees to meet the PIC qualifying condition of having made CPF contributions for three or more local employees.
e) Engaging in arrangements that seek to artificially inflate PIC claims such as purchase/lease arrangements bundled with non-qualifying costs (for example, offering a high cash back for trade-in of an old asset).
f) Artificially inflating the staff cost allocated to software development.
The Inland Revenue Authority of Singapore (IRAS) has issued a tax guidance in response to a Singapore based Bitcoin brokering service Coin Republic.
Sale and purchase of Bitcoins will be subject to taxation on the gains made on the sale of Bitcoins. However, if the Bitcoins form part of a business' investment portfolio, the IRAS will consider the gains from any sale to be capital in nature and not subject to taxation.
For Goods and Services Tax (GST), however, the situation is a little more complicated. Selling Bitcoins in return for goods or services is considered to be subject to GST. If the seller is GST registered, they will need to account for this in the course of their business activities.
The exception to this is in the form of virtual goods, such as in virtual gaming worlds, to use the IRAS' example. These are not subject to GST until they are exchanged for real services or goods.
Bitcoin itself is not considered a good, nor does it qualify as money or currency, according to the IRAS and under Singapore's GST Act. Instead, the supply of Bitcoins is examined under GST and varies according to how the service is provided.
Companies that merely facilitates and is acting as an agent in the Bitcoin trade will have GST chargeable on the commission fees received. However, if the company is acting as a principal in the Bitcoin trade (eg, buys and onward sells Bitcoins to the customer), GST is chargeable on the full amount received, ie, the sale of Bitcoins and commission fees."
Singapore's GST Act already indicates that if the business supplying services belongs to another country, then the entire supply shall be deemed to have been made outside of Singapore. The IRAS states that this would mean that GST would not be imposed.
Astab would like to wish all our clients and readers a happy and prosperous new year! As we step into the new year, we would like to remind all our readers a few of the upcoming compliance changes and the expiry of government grants.
Changes to CPF Contribution Rates Effective 1st January 2014From 1 January 2014, the CPF contribution rates for low-wage workers will be increased to help them save more for retirement. Private sector employees and government non-pensionable employees, including first and second year Singapore Permanent Residents (SPR), who are earning monthly wages of >$50 to <$1,500 will benefit from the changes. The following changes will apply to wages earned from 1 January 2014:
(i) Increase in Employer’s CPF Contribution Rate
The phased-in employer’s CPF contribution rates for all employees aged above 35 years old and earning wages of >$50 to <$1,500 will be increased to the full rates.
There is no change for employees aged 35 years and below and earning wages of >$50 to <$1,500 as the full employer’s CPF contribution rate already applies.
(ii) Increase in Employee’s CPF Contribution Rate
The phased-in employee’s CPF contribution rates for all employees earning wages of >$500 to <$750 will be increased. The phased-in employee's contribution rates for all employees earning wages of >$750 to <$1,500 will be increased to the full rates.
There is no change for employees earning wages of ≤$500 as they are not required to make employee CPF contributions.
You can also visit the CPF Board website for the softcopies of the CPF Contribution Rate Booklets.
Auto-Inclusion Scheme for Employment IncomeFrom Year of Assessment (YA) 2014, employers with 14 or more employees or who have received the "Notice to File Employment Income Of Employees Electronically" are required to participate in the Auto-Inclusion Scheme (AIS) under S68(2) of the Income Tax Act. Employers who are participating in the AIS for Employment Income can use the e-Submission of Employment Income to submit details of their employees' employment income to IRAS electronically. The submitted income and deduction information will then be automatically included in the employees' income tax assessment. Companies not in the AIS for Employment Income must still provide the hard copy IR8A/IR8S/Appendix 8A/Appendix 8B to their employees.
Expiry of the Productivity and Innovation CreditThe Productivity and Innovation Credit will end in the Year of Assessment (YA) 2015. This means that companies and businesses can claim the cash payout and enhanced deduction in qualifying expenditures up til the end of their financial year ending 2014. However, we hope that IRAS would extend the program to help companies offset the rising cost of business in the current challenging environment.
The European Union-Singapore Free Trade Agreement (FTA) was initialled by the chief negotiators from both sides on 20th September 2013 and will come into effect in 2015.
Currently, without the FTA, around 65 per cent of EU imports already have duty-free access.
According to analysis by the European Commission, the agreement could boost Singapore exports to the EU by S$5.91 billion (3.5 billion euros) over a ten-year period.
And EU exports to Singapore could rise by S$2.4 billion (1.4 billion euros) over the same period.
The analysis also estimates that as a result of the agreement, real EU GDP (gross domestic product) will grow by around 550 million euros over ten years, while the Singapore economy is expected to grow by 2.7 billion euros over the same period.
The disparity is due to the large difference in size between the two economies.
EU Chief Negotiator Rupert Schlegelmilch said: "If you look at some of our hard-hit economies in Europe, like Spain, one thing which is going well is exports. So trade is part of the recovery programme, and whatever we can do in the trade area -- by opening up further, by making it easier to have access to other markets, and also to be open to competition from third countries like Singapore, to have our economies made more competitive -- all of that helps. So it's a clear part of our strategy to revitalise and bring Europe back on the growth trajectory."
Singapore Chief Negotiator Keith Tan said: "If a company manufactures products in Singapore, but it imports its inputs and raw materials from ASEAN, it can count those ASEAN materials and inputs as if they were Singapore-originating and therefore this means that a larger number of Singapore products will be able to qualify for the concessions of the FTA."
The Ministry of Trade and Industry says that based on Singapore's latest bilateral trade figures in 2012, S$23.2 billion worth of Singapore goods representing 80 per cent of all EU tariff lines will qualify for immediate tariff-free treatment.
The remaining S$4.3 billion worth of Singapore goods representing 20 per cent of tariff lines will qualify at three or five years after the agreement enters into force.
But with the EU also exploring FTAs with Thailand, Malaysia and Vietnam, experts say it is a matter of time before some of Singapore's first mover advantage -- when it comes to removing tariff barriers on merchandise trade -- gets eroded.
Mizuho Bank senior economist, Vishnu Varathan said: "Some of these benefits that are derived, for example, the ability to get raw materials sourced from ASEAN - that may be on borrowed time, to the extent that neighbouring countries in ASEAN will also want to move up the processing chain, and they would also want to be involved in the competition for processing and exporting food."
Economists say it is the removal of non-tariff barriers that will have a greater impact on Singapore's services-driven economy. For instance, consumer electronics and telecommunication products that conform to relevant Singapore or EU standards can be sold in the respective countries without additional testing or certification requirements.
There are also provisions in the FTA for the future mutual recognition of professional qualifications.
Mr Vishnu said: "Over 65 per cent of (the Singapore) economy is the service sector. So the ability to get services across into the EU, I think that will place industries on a better footing. This is where Singapore can leverage its position as a regional hub for a lot of the financial services and legal services (firms)."
A record number of taxpayers are filing and paying their taxes on time, as revealed in IRAS’ Annual Report for Financial Year 2012/13 released today. Nine out of 10 individuals filed their 2012 tax returns on time, and nine out of 10 GST-registered businesses filed their GST returns on time throughout the year. Corporate taxpayers were also prompt, with eight out of 10 companies filing their 2012 tax returns by the due date.
Tax arrears dropped to a record low of 0.79% of the total net tax assessed. This contributed to the steady decline of total cumulative tax arrears - as at 31 Mar 2013, the total cumulative tax arrears stood at S$374 million, a significant reduction of S$109 million from the S$483 million of the previous Financial Year.
“Our ongoing efforts to promote a high level of voluntary compliance have resulted in more individuals and businesses filing their tax returns and paying taxes on time. On-time filing rates have improved across all tax types, while tax arrears declined to a record low of 0.79%, among the lowest in the world.”
Dr Tan Kim Siew
Commissioner of Inland Revenue
To make tax filing easier for individuals, the Auto-Inclusion Scheme (AIS) for Employment Income was extended to 36,000 employers in 2013’s tax filing season, up from 27,000 employers in 2012 (Figure 3A, Page 30 of Annual Report). The No-Filing Service (NFS) was further extended to 1.13 million taxpayers in 2013, up from 963,000 in 2012. This made this year’s tax filing period a non-event for the majority of taxpayers in Singapore (Figure 4A, Page 34 of Annual Report).
Simplifying Processes to Better Serve Businesses
To make it easier for small companies to report corporate income tax, IRAS introduced the simplified Form C-S in 2012. 63% (or 70,400 companies) of the small companies benefitted from this streamlined tax reporting process, cutting the average time taken to file their 2012 tax returns by half.
96% of Companies Benefiting from PIC are SMEs
Beyond raising voluntary tax compliance levels, IRAS played a key role in managing the Productivity and Innovation Credit (PIC) scheme since its introduction in 2010. In 2012, 44,000 companies or 37% of active companies benefited from the PIC scheme, up from 36,400 companies (33% of active companies) in 2011 (Figure 2A, Page 22 of Annual Report). 96% of the companies that claimed PIC in 2011 and 2012 were Small and Medium Enterprises (SMEs) with annual turnover of up to $100 million (Figure 2D, Page 24 of Annual Report).
In 2012, 62% of PIC claims were for the purchase or lease of automation equipment. 35% of PIC claims were for the training of employees while the remaining 3% of PIC claims were for other qualifying activities (Figure 2E, Page 25 of Annual Report).
Convenient, One-Stop Access to Tax Statistics
To provide members of the public with one-stop access to official tax statistics, 24 datasets with historical data, some dating back to FY 2000, are now available here. These data include details of the taxes collected by IRAS, taxpayer compliance rates, IRAS’ service standards, and other indicators.
In the past, most of these datasets were published in IRAS’ Annual Reports in PDF format. For the convenience of the public, IRAS is now presenting the data in an Excel format. This allows anybody to easily retrieve the data, study its trends and conduct meaningful analyses.
Highlights of FY2012/13 at a Glance
The IRAS 2012/13 Annual Report is available at this link: http://www.iras.gov.sg/irasHome/page.aspx?id=15206
The Tax Statistics webpage is available at this link: http://www.iras.gov.sg/irasHome/page.aspx?id=15060
Inland Revenue Authority of Singapore
Note: IRAS’ Financial Year 2011/12 is from 1 April 2011 to 31 March 2012.
The above is a media release from IRAS taken from the following page