Navigating Corporate Tax Compliance in Singapore: Avoiding Penalties and Staying Compliant
Why is it Important to Pay Corporate Tax in Singapore?
Companies in Singapore must file corporate tax on time and accurately. The corporate tax comprise of two components: Estimated Chargeable Income (ECI) and Form C-S/C-S (Lite)/Form C. It is important that they do so for several reasons:
- Achieve Statutory Compliance: Corporate tax is a legal obligation under Singapore’s Income Tax Act. Companies that do not fulfill their tax responsibilities can face penalties, fines, and legal consequences, which can tarnish their reputation.
- Avoidance of Penalties: Failure to pay corporate taxes or filing inaccurately can result in hefty penalties, interest charges, and audits by IRAS, which can disrupt business operations and cash flow.
- Business Credibility: Making payment on time signals financial responsibility and transparency. This enhances the company’s reputation with stakeholders, such as investors, customers, suppliers, and financial institutions. A credible company is more likely to attract investment, secure financing, and establish strong business partnerships.
Penalties for Late Filing or Non-Filing of Corporate Income Tax Returns for Form C-S/C-S (Lite)/C
Companies that file their corporate income tax returns late after the 30 November deadline or do not file them will be imposed with a composition amount or face recovery actions.
- Estimated NOA: IRAS may issue an estimated NOA based on the offending company’s income for the past years or information that they may possess.
- Offer of Composition: IRAS may allow the company to pay a composition amount instead of taking actions to prosecute. The amount, not exceeding S$5,000 per offence, may be offered depending on the company’s past compliance records.
- Notice to Attend Court or Summons: This may be issued to the company or the company directors to attend Court on a specific date if IRAS does not receive the mandatory tax return and/or documents by the deadline.
Late Payment or Failure to Pay Corporate Tax
Companies are expected to pay within 1 month from the Notice of Assessment (NOA) date. IRAS may impose these actions if a company fails to do so by the due date:
- Demand late payment penalties
- Take legal action
- Designate agents such as your company’s bank, tenant or lawyer managing the sale of any of your property to recover the overdue tax
Penalties for Errors in Tax Returns
In addition to the penalties above, IRAS also audits tax returns and imposes penalties for errors, discrepancies, and omissions. Taxpayers face consequences depending on the presence of evidence that indicate the intention to evade taxes.
Voluntary Disclosure of Corporate Income Tax Errors
IRAS knows that taxpayers can sometimes make errors in their tax returns because of an absence of care or knowledge of their tax obligations. The IRAS Voluntary Disclosure Programme (VDP) encourages taxpayers who have made errors to come forward voluntarily and timely to correct their mistakes and displays their willingness to reduce penalties for voluntary disclosures meeting the qualifying conditions.
Voluntary Compliance Initiatives
Companies can enjoy benefits such as a prolonged grace period or penalty waivers when they voluntarily disclose errors by adopting these initiatives:
- Tax Governance Framework (TGF): A one-time extended grace period of 2 years for errors voluntarily disclosed by the business within 2 years from IRAS’ approval date of the company’s TGF application
- Tax Risk Management and Control Framework for Corporate Income Tax (CTRM): A one-time waiver of penalties for voluntary disclosure of previous years’ errors for businesses with the CTRM status
How to Make a Voluntary Disclosure
Companies must perform these steps to make a successful voluntary disclosure application:
- Make the disclosure on the Revise/Object to Assessment e-service on IRAS’ myTax Portal where they will receive an instant acknowledgement. They may also receive the revised NOA earlier
- Email the necessary information and supporting documents to ctmail@iras.gov.sg
Conclusion
Navigating corporate tax compliance in Singapore can be complex and daunting, but it is essential to avoid penalties and maintain a good reputation. By understanding the penalties for late filing, non-filing, and errors in tax returns, companies can take proactive steps to ensure compliance. Additionally, the IRAS Voluntary Disclosure Programme offers benefits for companies that voluntarily disclose errors and take steps to correct them.
FAQs
Q: What is the penalty for late payment of corporate tax in Singapore?
A: A 5% late payment penalty will be imposed on the unpaid tax if full payment is not received by the deadline of the NOA.
Q: What is the penalty for late payment of ECI?
A: The penalty for late payment of ECI is the same as for Form C-S/C-S (Lite)/Form C.
Q: What is the penalty for errors in tax returns?
A: The penalty depends on whether there is evidence to prove that there was an intention to evade taxes. If there is evidence, there may be a penalty of up to 400% of the amount of undercharged tax, a fine of up to S$50,000, or a prison term of up to 5 years.
