FasTax Key Fundamentals of Corporate Tax Presentation by Inland Revenue Authority of Singapore For workshops held in Aug/ Oct 2016

Transcription

1 FasTax Key Fundamentals of Corporate Tax Presentation by Inland Revenue Authority of Singapore For workshops held in Aug/ Oct 2016 iras.gov.sg Twitter.com/IRAS_SG Facebook.com/irassg 1

2 Agenda 1. Introduction of SingPass 2FA 2. Budget 2016 Highlights - Compulsory e-filing of Corporate Income Tax Returns - Compulsory e-filing of PIC Cash Payout - Enhancement of Corporate Income Tax Rebate 3. Company s Tax Filing Obligations - Accessing IRAS e-services 4. Basic Corporate Tax Rules - Income - Deductibility of Expenses - Common Mistakes on Form C/ C-S Completion and Deduction Claims - Capital Allowance - Group Relief 5. 4 Case Studies (different business types and tax schemes) 2

3 Introduction of SingPass 2FA 3

4 What SingPass 2FA is about 2-step Verification (2FA) is an additional security feature implemented for government transactions involving sensitive data. Taxpayers will need to verify their identity via a physical OneKey token or an SMS notification From 5 Jul 2016, those who have not activated their 2FA will have a one-time grace period of 30 days upon first log-in Please use this grace period to activate your 2FA After the grace period, individuals who did not set up 2FA will not be able to access government e-services, including mytax Portal to e-file CIT returns, PIC cash payouts etc They will need to register for 2FA and wait up to seven to ten working days for a PIN mailer to activate 2FA For enquiries on SingPass, please refer to 4

5 For enquires on SingPass, you may call SingPass Helpdesk at

6 Budget 2016 Highlights for Businesses 6

7 Summary of Budget 2016 Changes Tax Changes Summary Expiry of PIC Scheme The PIC Scheme will lapse after YA 2018 Tapering PIC Cash Payout Rate Cash payout rate reduced from 60% to 40% for PIC qualifying expenditure incurred on or after 1 Aug 2016 Compulsory e-filing of PIC Cash Payout Application Compulsory e-filing of Corporate Income Tax Returns Corporate Income Tax rebate Compulsory e-filing of PIC cash payout applications wef 1 Aug 2016 Compulsory e-filing of CIT returns (including ECI, Form C-S/ C) in phased approach from YAs 2018 to 2020 YA 2018: Coy with turnover > $10M in YA 2017 YA 2019: Coy with turnover > $1M in YA 2018 YA 2020: All companies Increase CIT rebate from 30% to 50% on corporate tax payable (except final withholding tax on income) Subject to cap of $20,000 each for YA 2016 and YA 2017 Business and IPC Partnership Scheme (BIPS) Businesses will enjoy a 250% tax deduction on qualifying expenditure incurred when sending their employees to volunteer and provide services to Institutions of a Public Character (IPCs), including secondments Applicable from 1 Jul 2016 to 31 Dec

8 Compulsory e-filing Objective More cost effective delivery of public services Aligned with Smart Nation vision to harness technology to enhance productivity With the availability of e-filing services, all companies can benefit from reduced compliance costs and productivity gains while enjoying the convenience of going paperless Budget Change Compulsory e-filing of CIT returns (including ECI, Form C-S/ C) in phased approach from YAs 2018 to 2020 YA 2018: Coy with turnover > $10M in YA 2017 YA 2019: Coy with turnover > $1M in YA 2018 YA 2020: All companies Compulsory e-filing of PIC cash payout applications wef 1 Aug

9 Enhancing the Corporate Income Tax Rebate Objective To help companies especially Small and Medium Enterprises ( SMEs ) manage cost pressures in this period of restructuring Budget Change Increase CIT rebate from 30% to 50% on corporate tax payable (except final withholding tax on income) Subject to cap of $20,000 each for YAs 2016 and 2017 Administratively: Companies need not factor in the CIT Rebate when filing the Estimated Chargeable Income and the Income Tax Return (Form C-S/ C) as IRAS will compute and allow it automatically. For companies who had earlier on filed their ECI for YA 2016 or 2017, the revised Notices of Assessment (NOAs) and refunds for excess tax paid on the affected ECIs have been issued to companies by 1st week of July If the company is paying the tax by instalments, the revised instalment plan will be issued to the company with the revised NOA. 9

10 Company s Tax Filing Obligations 10

11 Company s Tax Filing Obligations Estimated Chargeable Income (ECI) Income Tax Return (Form C-S/ C) When to file Notification of filing requirement Within 3 months after end of financial year (e-filing of ECI via mytax portal is strongly encouraged) Waiver of ECI filing: You do not need to file ECI for a particular financial year if: annual revenue is not more than $1 million; and ECI is nil Company will receive a reminder letter to file the ECI in the last month of the financial year If you are filing Form C Submit a complete tax return comprising of the following: - Form C and appendix (Form IRIN 301) - audited/unaudited financial statements and detailed P/L - tax computation and supporting schedules If you are filing Form C-S Do notneed to submit your audited/unaudited financial statements and detailed P/L as well as tax computation Form C-S/C to be submitted by 30 Nov of each year. If you e-file, the deadline is extended to 15 Dec A tax return filing package will be sent to the company s registered address by May of each year Failure to file Estimated assessment may be raised* Estimated assessment may be raised* Letter of Composition and/or Summons may be issued If you are in a tax loss position A NIL ECI (ECI = 0) is required unless the company has met the qualifying conditions for waiver of ECI filing Submit an Income Tax Return (Form C-S/ C) # Please authorise yourself/third party as an Approver for Corporate Tax Matters via the e-services Authorisation System (EASY) * If you disagree with the estimated tax assessment, please lodge an objection within two months from the date of the Notice of Assessment with your reasons for not filing on time and grounds of objection 11

12 Income Tax Return Income Tax Return File Form C-S (Simplified Tax Filing for Small Companies) For companies that meet qualifying conditions OR File Form C and Appendix on Additional Information on Income & Deductions (Form IRIN 301) 12

13 Qualifying Conditions for Filing Form C-S Company: Is incorporated in Singapore Has an annual revenue* of $1 million or below Derives only income taxable at 17% Does not claim any of the following: Carry-back of Current Year Capital Allowances/Losses Group Relief Investment Allowance Research & Development Tax Allowance Foreign Tax Credit and Tax Deducted at Source * Revenue refers to the main income source of the company excluding separate source income such as interest Note: Companies that do not meet the conditions have to submit to IRAS a full set of tax return comprising the Form C, financial statements, tax computation and supporting schedules. 13

14 How to Access e-services including e-filing Form C-S/C Company Administrator e-services Authorisation System (EASY) Company Staff/ Tax Agent Access code and SingPass/ IRAS Pin Authorise SingPass/ IRAS Pin Login to mytax.iras.gov.sg START! Use e-services 14

15 e-services Authorisation System (EASY) Online system that allows organisations to authorise their employees/third party to access e-services on their behalf All authorisations of staff and directors/ tax agent must be done at EASY Log in to EASY using your company s Access Code* *Access Code is a unique password issued and sent to company s registered address shortly after its incorporation. Please request a new Access Code if you have misplace your access code or its existing Access Code is no longer valid. The request form is available at IRAS website iras.gov.sg e-services > Businesses > Companies > EASY For guidance, refer to User Guides on IRAS website at iras.gov.sg - e-services > Others > EASY >Getting Started 15

16 e-services Authorisation System (EASY) Log in to EASY Access Code application form Log in using your individual SingPass OR IRAS Pin 16

17 e-services Authorisation System (EASY) Preparer A preparer prepares the application/ form for submission to an Approver The preparer does not have the rights to submit directly to IRAS Approver IRAS An Approver will approve or edit, and submit the application/ form to IRAS The approver can also prepare the application/ form and submit it to IRAS (for companies without the Preparer role) 17

18 Basic Corporate Tax Rules 18

19 Basis of Assessment Income is assessable on a preceding financial year basis Year of Assessment (YA) year in which income tax is charged current YA is YA 2016 Basis Period for a YA the period of income relevant to the YA e.g. 1 Jan 2015 to 31 Dec 2015 (YA 2016) 1 Apr 2014 to 31 Mar 2015 (YA 2016) 1 Jul 2015 to 30 Jun 2016 (YA 2017) 19

20 Income 20

21 Taxable Income Income tax is payable on: Singapore-sourced Income accruing in or derived from Singapore (i.e. income sourced in Singapore) E.g. Trade income of a company carrying on business in Singapore Foreign-sourced (remitted) Income received in Singapore from outside Singapore (i.e. foreign income received in Singapore) E.g. Interest income from a foreign bank outside Singapore that is remitted to Singapore Foreign-sourced income unremitted Tracking of unremitted income Disclosed in tax computation schedule Deemed remitted S10(25) 21

22 Income Charging Section S10(1) Income tax shall.be payable at the rate or rates for each year of assessment upon the income of any person: Accruing in or derived from Singapore; or Received in Singapore from outside Singapore Charging Section S10(1)(a) Gains or profits from any trade, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised Other Charging Sub-sections S10(1)(d): Dividend, interest or discounts S10(1)(f): Rent, royalties, premiums and any other profits arising from property and S10(1)(g): any gains or profits of an income nature not falling within any of the preceding paragraphs 22

23 Capital vs Revenue Receipts Income of a revenue nature is taxable Capital gains are not taxable Hence, revenue expenditures are deductible but not capital expenditures Distinction between receipts relating to assets forming part of the permanent structure of the business (capital in nature) vs those which do not (revenue in nature) Distinction between fixed and circulating capital 23

24 Badges of Trade 1. Nature of subject matter 2. Length of ownership 3. Frequency of transactions 4. Supplementary work 5. Circumstances of the realisation 6. Motive 7. Mode of Financing 8. Other factors Refer to IRAS website at iras.gov.sg Businesses > Companies > Working out Corporate Income Taxes > Taxable and Non- Taxable Income > Determining the Existence of a Trade 24

25 Deductibility of Expenses 25

26 Deductions against Income Deductions allowed for expenses wholly and exclusively incurred in the production of income Expenses must be revenue in nature (e.g. normal day-to-day operating expenses Expenses must be incurred (i.e. not contingent liability or estimated amount) Deduction must not be prohibited under Section 15 of the Income Tax Act (e.g. private plated car expenses even if incurred for business purposes) 26

27 Expenses incurred before Commencement of Business ( Pre-commencement Expenses ) Revenue expenses incurred During the financial year in which company earns its first dollar of business receipt From YA 2004 to YA 2011 Tax deductible From YA 2012 Tax deductible 1 year before the first day of the basis period in which company earns its first dollar of business receipt Not tax deductible Tax deductible The revenue expenses are treated as incurred on the deemed date of commencement of business* *Does not apply to S10E companies Refer to IRAS website at iras.gov.sg Businesses > Companies > Learning the Basics of Corporate Income Tax > Common Tax Reliefs That Help Reduce The Tax Bills 27

28 Pre-commencement Expenses Example: Company incurred revenue expenses on Company earned its first dollar of business receipt on Deemed date of commencement is (date of incorp.) (YA 2015) (YA 2016) (YA 2017) Revenue expenses incurred from to (YA 2015) are not deductible Revenue expenses incurred from: to (YA 2016) treated as incurred on , as expenses were incurred one year before deemed date of commencement. Deductible in YA to (YA 2017) Deductible as business is treated as having commenced on

29 Interest Expense 29

30 Overview of Interest Expense Deduction Interest expense is deductible under Section 14(1) if it is incurred on a loan that is revenue in nature Example: Loan is used to purchase trading stock If the interest expense is incurred on capital employed in acquiring the income, it is deductible under Section 14(1)(a) Example: Manufacturer uses loan to purchase a factory that makes goods for sale If company is unable to identify any specific purpose /use for the loan, the part of interest relating to non-income producing assets is not tax deductible 30

31 Total Asset Method Interest Adjustment Interest expenses not allowable for deduction (for example): Interest expenses attributable to the period before the commencement of business; and Interest expenses attributable to non-income producing assets: Examples of non-income producing assets: Investments in shares/securities which do not yield dividends or yield dividends that are not taxable*; amount owing by non-trade/sundry debtors/related companies (non-trade)/shareholders; or Vacant properties * For example, one-tier or exempt dividends from passive investments are not taxable, and hence the interest expense directly attributable to these dividends are not tax deductible. In addition, it cannot be deducted against other sources of income. 31

32 Total Asset Method Interest Adjustment Compute interest adjustment on interest expenses attributable to nonincome producing assets using Total Asset Method: Common method; and Governing principle: Total funds used to finance total assets Cost of non-income producing assets x Interest Expense Cost of total assets * * Stated at cost with no deduction of provisions made (e.g. provision for doubtful debts/stock obsolescence, accumulated depreciation) and valuation surplus/deficit. For taxpayers that adopted FRS 39 tax treatment, the value of the assets is the value reported in the balance sheet without adjustment for any provisions made and valuation surplus/deficit. However, they can make an election in writing if they wish to continue to use historical cost. 32

33 Total Asset Method Interest Adjustment Note: Interest expense adjustment not required for interestfree loan or amount owing by directors Constitutes staff cost; Interest-free benefits are taxable as employment benefits; Must be included in the directors Form IR 8A Interest-free benefits can be calculated based on Interest-free loan due from each director as at the Balance Sheet date multiply by the average prime lending rates You can refer to Monetary Authority of Singapore (MAS) website for the prime lending rates. 33

34 Any Sum Payable by Way of Interest Interest on Refinanced Loans Administrative Concession Interest on loan taken up to refinance an earlier loan or borrowing is not deductible as the subsequent loan is taken up to repay an existing one and the interest incurred is therefore not payable on capital employed in acquiring income Concession: Claims for deduction of interest incurred on loans or borrowings taken up to refinance earlier loans or borrowings may be deductible if the re-financing is effected for genuine commercial reasons, for example: To achieve an overall reduction in cost of finance (e.g. due to better credit terms such as lower interest rates) The re-financing arrangement is necessary due to taxpayer s financial position (e.g. due to financial difficulties, taxpayer needs to restructure the loan) 34

35 Borrowing Costs other than Interest Expenses With effect from YA 2008, prescribed borrowing costs that are incurred as a substitute for interest expense or to reduce interest costs will be deductible Refer to the prescribed list of deductible borrowing costs in the Annex of the e-tax Guide Refer to IRAS website at iras.gov.sg e-tax Guides > Income Tax: Tax Deduction For Borrowing Costs Other Than Interest Expenses (Second Edition) 35

36 Medical Expenses 36

37 Medical Expenses Deduction capped at: 1% of total employee remuneration or 2% of total employee remuneration if Company: Implemented Portable Medical Benefits Scheme (PMBS) or Transferable Medical Insurance Scheme (TMIS); and Met qualifying conditions under respective schemes (For details, refer to guidelines issued by the Ministry of Manpower) Cap of 2% of total employee remuneration will also apply if: Company provided employees with inpatient medical insurance benefits in the form of portable medical shield plans: by paying insurance premiums on behalf of employees to insurance companies directly; or by reimbursing employees Medisave Accounts, premiums paid by employees Company made ad-hoc contributions to employees Medisave Accounts (subject to cap of $1,500 per employee per year) 37

38 Medical Expenses Total remuneration Includes: employees' salaries, allowances & bonuses directors' remuneration CPF contributions Excludes: directors' fees medical expenses cash allowances in lieu of medical expenses benefits-in-kind skills development levy (SDL) foreign worker levy (FWL) 38

39 Section 14Q Deduction for Expenditure Incurred on Renovation or Refurbishment (R&R) Works 39

40 Deduction for Expenditure Incurred on Renovation or Refurbishment (R&R) Works under Section 14Q (incurred from 16 Feb 2008) Granted over 3 consecutive years on a straight-line basis so long as company continues to carry on that trade for which the R&R costs were incurred Subject to an expenditure cap of $150,000* for every relevant threeyear period * Expenditure cap increased to $300,000 from YA 2013 Granted separately from the capital allowance framework for plant & machinery No need to compute balancing adjustment on disposal of R&R Section 14Q deduction cannot be deferred and must be claimed over 3 years 40

41 Deduction for Expenditure Incurred on Renovation or Refurbishment (R&R) Works under Section 14Q (incurred from 16 Feb 2008) Excludes expenditure relating to structural changes made to business premises and any: a) design fees or professional fees b) antique c) any type of fine arts d) any works carried out in relation to a place of residence provided or to be provided to the company s employees (applies to expenditure incurred from 18 Dec 2012) Deduction against income => Forms part of adjusted loss Available for carry forward & carry back Prior to YA 2013, unutilised S14Q deduction is not allowed to be transferred under group relief system 41

42 Deduction for Expenditure Incurred on Renovation or Refurbishment (R&R) Works under Section 14Q (incurred from 16 Feb 2008) Examples of qualifying expenditure (if they do not affect structure of the business premises) General electrical installation and lighting Kitchen and sanitary fittings Door and window Fixed partition Wall covering Flooring False ceiling and cornice More examples are available at IRAS website iras.gov.sg Refer to IRAS website at iras.gov.sg Businesses > Companies > Working Out Corporate Income Taxes > Business Expenses > Tax treatment of Business Expenses > Renovation or Refurbishment Works Expenditure (Section 14Q) 42

43 Deduction for Expenditure Incurred on Renovation or Refurbishment (R&R) Works under Section 14Q (incurred from 16 Feb 2008) Example: (Assuming no R&R costs incurred in the previous years) Total qualifying R&R costs incurred YA 2014 YA 2015 YA 2016 $90,000 $120,000 $150,000 Qualifying R&R costs $90,000 $120,000* $90,000* R&R claim $30,000 ($90k / 3 yrs) $70,000 [$30,000 + $40,000 ($120k /3 years)] $100,000 [$30,000 + $40,000+$30,000 ($90,000/3years)] * In YA 2015, the amount of qualifying R&R cost to be allowed is $120,000 ($300,000-$90,000) as the combined qualifying R&R cost for YA 2014 and YA 2015 is still within the qualifying expenditure cap of $300,000 for the relevant three-year period. In YA 2016, qualifying R&R cost to be allowed is capped at $90,000 ($300,000-$90,000-$120,000). 43

44 Common Mistakes on Form C/ C-S Completion and Deduction Claims 44

45 Common Mistakes to Avoid 1. Double claim of PIC benefits Cannot claim both PIC Cash Payout and 100% / 400% tax deductions on the same dollar of expenditure E.g. A company that has claimed PIC Cash Payout on training costs of $1,000 should not be claiming 400% tax deduction of the same training cost against its income, i.e. the training expense of $1,000 should be added back in the tax computation. 2. Incorrect claim on non-qualifying expenditure Do not claim PIC benefits for equipment not listed in the PIC IT and Automation Equipment List If the equipment is not in the list but it automates/mechanises the work process, businesses may apply for it to be approved, on a case-by-case basis Do not claim non-qualifying expenditure such as: GST paid by a GST registered trader on an item qualifying for PIC (GST component is not claimable for income tax purpose as the GST trader can claim input tax in its GST return); costs not applicable to the automation equipment such as warranty fees and service maintenance fees; consulting fees unrelated to the development of the automation equipment Note: Penalties may be imposed for incorrect claims 45

46 Common Mistakes to Avoid 3. Chargeable Income ( CI ) Before Exempt Amount/ After Exempt Amount Incorrectly declaring CI after exempt amount as CI before exempt amount in Form C Results in double-claiming of tax exemption and lowering of tax payable amount An illustration of a tax computation for YA 2016: Example - Partial Tax Exemption: $ $ CI before exempt amount 11,700 Less: 1 st $10,000@75% 7,500 Next $1,700@50% 850 (8,350) CI after exempt amount 3,350 Tax@17% Less: CIT rebate@50% Tax payable

47 Common Mistakes to Avoid A. Illustration of a wrong declaration $ 3,350 $ 3,350 B. Illustration of a correct declaration $ 11,700 $ 11,700 Extracted from YA 2016 Form C 47

48 Common Mistakes to Avoid 4. Receipts Claimed as Not Taxable Did not include Receipts claimed as not taxable in Form C, e.g. disposal of properties, shares or other investments Extracted from YA 2016 Form C Did not exclude tax exempt income from Box 26 above, e.g. onetier exempt dividend 48

49 Common Mistakes to Avoid 5. Not Declaring Foreign Income Received in Singapore (Box 2a) when Claiming Foreign Tax Credit (Box 12) in Form C Did not ensure that foreign income received in Singapore is declared in Box 2a instead of Box 1a Extracted from YA 2016 Form C 49

50 Capital Allowances 50

51 Capital Allowances Capital allowances given in place of depreciation and other capital expenditure, which are not tax-deductible Given on qualifying fixed assets bought and used for trade purposes Exception - S-plated private passenger car Not part of setting or part of premises in which business is carried on (e.g. renovation expenditure => Does not qualify for capital allowance, claim section 14Q deduction instead) Refer to IRAS website at iras.gov.sg Businesses > Companies > Working Out Corporate Income Taxes > Claiming Allowances 51

52 Capital Allowances Examples of qualifying fixed assets: Carpet Electrical and electronic equipment (e.g. air-conditioning system, security/alarm system, sprinkler system and electrical appliances) Furniture and fixtures Industrial plant and machinery Motorcycle and bicycle Motor vehicle (goods/commercial vehicle such as lorry, truck and van) Movable partition Office equipment (e.g. computer, printer, photocopier, fax machine and telecommunication equipment) Venetian blind and curtain 52

53 Capital Allowances How to calculate Qualifying assets Annual allowance (AA) Over working life of asset [Section 19] Apply to all qualifying assets Refer to 6 th Schedule of Income Tax Act for working life Initial allowance (IA) = 20% of cost AA = (80% of cost) / No. of years of working life 3-year write-off [Section 19A(1)] 1-year write-off (for specific assets) [Section 19A(2)] Apply to all qualifying assets Computers Prescribed automation equipment listed in Income Tax (Automation Equipment) Rules 2004; and Amendment Rules 2010 (effective from 15 Dec 2010) AA = 1/3 of cost AA = 100% of cost 53

54 Capital Allowances How to calculate Qualifying assets Annual allowance (AA) 1-year write-off (only for low-value assets) [Section 19A(10)] Low-value assets Cost of each asset not more than $5,000* Total claim for 1-year write-off of all such assets capped at $30,000 per YA * Before YA 2013, it was $1,000 AA = 100% of cost 54

55 Unutilised Capital Allowances (UCA), Unutilised Losses (UL) and Approved Donations 55

56 Unutilised Capital Allowances (UCA) & Unutilised Losses (UL) May be carried forward to set-off future income of company or carry-back for one YA immediately preceding that YA in which the CAs are granted or trade losses incurred Conditions for claiming UCA & UL brought forward/ carry-back: Same Business Test Applies only to UCA Same trade in respect of which CA were granted Shareholders Test Applies to both UCA & UL Ultimate shareholders & their shareholdings as at two relevant dates are substantially the same (50% or more of total issued shares) Refer to IRAS website at iras.gov.sg Businesses > Companies > Working Out Corporate Income Taxes > Unutilised Items (Losses, Capital Allowances and Donations) 56

57 Unutilised Capital Allowances (UCA) & Unutilised Losses (UL) Additional things to note for loss carry-back relief: Maximum amount of loss carry-back is $100,000 Loss carry-back will be deducted in the following order: o Current year s unutilised CAs, if any o Current year s trade losses, if any Available to all businesses, including sole proprietors and partnerships Carry-back relief will be given only if the company makes a claim Company can elect to carry back its loss carry-back after transferring its loss items under the group relief system, if applicable Refer to IRAS website at iras.gov.sg Businesses > Companies > Working Out Corporate Income Taxes > Claiming Reliefs > Loss Carry-Back Relief 57

58 Unutilised Capital Allowances (UCA) & Unutilised Losses (UL) Carry-Forward Relevant Dates UCA Last day of YA (31 Dec) in which CA arose & First day of YA (1 Jan) in which UCA is set-off UL Last day of year (31 Dec) in which losses incurred & First day of YA (1 Jan) in which UL is set-off Example: UCA and UL for financial year ended 31 Oct 2011 (YA 2012) to be set-off against income in YA UCA UL Relevant Dates 31 Dec Jan Dec Jan

59 Approved Donations Donations are not deductible expenses as they are not incurred in the production of income Please add back to arrive at adjusted profit However you can claim deduction on donations made to approved IPCs or other approved recipients for Singapore charitable purposes Claim deduction of 2.5 times the amount of donations made from 1 Jan 2009 to 31 Dec 2014 and from 1 Jan 2016 to 31 Dec 2018* Claim deduction of 3 times the amount of donations made from 1 Jan 2015 to 31 Dec 2015* * Announced in Budget

60 Approved Donations From 1 Jan 2011, company is required to provide its identification number to an IPC to claim tax deduction on the donation made View donations made to approved IPCs from 1 Jan 2011 at the e- Service View Donations in mytax.iras.gov.sg Unutilised donations can only be carried forward and for up to 5 years For example: Unutilised donations for YA 2010 should be disregarded in YA 2016 Condition for claiming unutilised donations Satisfy shareholders test (% of shareholding of common shareholders as at two relevant dates are 50% or more) Last day of year (31 Dec) in which donations were made Relevant Dates & First day of YA (1 Jan) in which unutilised donations are to be deducted 60

61 Group Relief 61

62 Group Relief Enables companies in the same group to deduct the following items of one company against the assessable income of another company: Current year unutilised capital allowance Current year unutilised trade losses Current year unutilised donations Qualifying Conditions Transferor and claimant must be Singapore companies; Belong to the same group of companies and maintain 75% shareholding threshold; and Have the same financial year-end incorporated Refer to IRAS website at iras.gov.sg Businesses > Companies > Working Out Corporate Income Taxes > Claiming Reliefs > Group relief 62

63 Assistance and Service Channels Website Home > Businesses > Companies Home > News & Events > Budget 2016 Overview of Tax Changes for general tax matters for payment matters For Productivity and Innovation Credit matters: For companies: For self-employed/partnership: Helpline For companies: am to 5.00pm from Mondays to Fridays Best time to call: 8.30am 10.30am Best day to call: Friday 63

64 This information aims to provide a better general understanding of IRAS practices and is not intended to comprehensively address all possible tax issues that may arise. This information is correct as 12 Aug While every effort has been made to ensure that this information is consistent with existing law and practice, should there be any changes, IRAS reserves the right to vary our position accordingly. 64

65 Annexes 65

66 (1) Tax Schemes to Lower Tax Payable - Partial Tax Exemption - Tax Exemption for New Start-up Companies 66

67 Partial Tax Exemption Partial tax exemption on chargeable income taxed at 17% of up to $300,000: First 75% $7,500 Next 50% $145,000 Total $300,000 $152,500 Maximum Exempt Amount is $152,500 for each YA 67

68 Tax Exemption Scheme for New Start-up Companies Granted to qualifying new company for its first 3 consecutive YAs Exemption granted on chargeable income taxed at 17%: YA Exempt Income 2008 onwards First 100%= $100,000 Next 50% = $100,000 $300,000 $200,000 Maximum Exempt Amount is $200,000 for each YA Refer to IRAS website at iras.gov.sg Businesses > Companies > Learning the Basics of Corporate Income Tax > Common Tax Reliefs That Help Reduce The Tax Bills 68

69 Tax Exemption Scheme for New Start-up Companies Qualifying conditions Company incorporated in Singapore Tax resident in Singapore for that YA A company is tax resident in Singapore if control and management of its business is exercised in Singapore No more than 20 shareholders throughout basis period for that YA All are individuals beneficially and directly holding the shares in their own names; or Where there are non-individual shareholders, at least one is an individual beneficially and directly holding at least 10% of the issued ordinary shares of the company 69

70 Tax Exemption Scheme for New Start-up Companies Qualifying conditions The following companies incorporated after 25 Feb 2013 are not eligible for the tax exemption scheme: 1) Property development companies Any company that buys or leases land and arranges for a building to be built on land in order to lease, manage or sell the building 2) Investment holding companies A company whose principal activity is that of investment holding Derives investment income such as rental, dividend or interest income Companies that do not qualify for this scheme will still be eligible for partial tax exemption 70

71 Tax Exemption Scheme for New Start-up Companies Example: Date of incorporation: 1 Nov 2013 Financial year-end: 31 Dec 2014 For trading company, attribute the adjusted profit/ loss to YA 2014 and YA Time basis of apportionment may be used. First set of accounts: 14 mths YA 2014 (1 st YA upon incorporation) YA 2015 (2 nd YA) YA 2016 (3 rd YA) YA 2017 onwards Partial tax exemption 71

72 (2) Investment Holding Company 72

73 What is an Investment Holding Company Principal activity is the passive holding of investments Owns investments such as properties and shares for the long-term Derives investment income, passive in nature, such as: Dividend [S10(1)(d)] Interest [S10(1)(d)] Rental income [S10(1)(f)] 73

74 Deductible expenses What is it? Deductibility Examples Direct expenses Expenses directly incurred to earn investment income Deductible against the respective source of investment income Custodian fees (for income producing shares) Property tax, insurance, repairs & maintenance (for rental properties) Interest expense (on loan taken to acquire shares / property) Statutory and Regulatory expenses Expenses incurred in accordance with statutory and regulatory provisions Before YA 2014, allowed as an administrative concession From YA 2014, deductible under S14X of the ITA Apportion to the respective source of investment income Accounting fees Annual listing fees Audit fees Bank charges Income tax service fees Printing and stationery Secretarial fees Indirect expenses Expenses not directly incurred to earn investment income Generally not deductible As a concession, indirect expenses not exceeding 5% of the total gross investment income is deductible Apportion to the respective source of investment income Directors' fees, Office rental, Office telephone charges, Office water and light, Staff salaries, Transport expenses (exclude expenses incurred on S-plated cars which are not deductible) 74

75 75

76 (3) Administrative Procedures to Objection and Appeal Process 76

77 Administrative Procedures to Objection & Appeal (O&A) Process Assessment Litigation (Income Tax Board of Review /Courts) Objection No Agreement Judgment Review Agreement / Settlement Finalised Assessment Tax Certainty 77

78 Administrative Procedures to Objection & Appeal (O&A) Process Key Points to Note Extended Objection deadline Acknowledgement 2 months from date of NOA Issued for objections filed via e-objection or Objection Form CIT s response Taxpayer s response Notice of Refusal to Amend (IR 23) Within 6 months from date of receipt of complete information (exception: complex cases) Within 3 months from date of CIT s letter (re: decision on tax issue under dispute) Issued under specific circumstances CIT will send a final reminder to taxpayer before issuing Notice of Refusal to Amend 78

79 Administrative Procedures to Objection & Appeal (O&A) Process Filing an Objection Acknowledgement of an Objection via: e-objection at mytax.iras.gov.sg Recommended! Instant acknowledgement Objection Form acknowledgement within 14 days from date of receipt of Objection Form Letter no acknowledgement will be issued Note: Both e-objection & Objection Form include a list of questions which assists taxpayer to ascertain whether an objection filed is valid or otherwise Taxpayers/ Tax agents are encouraged to file objections via e-objection or Objection Form 79

80 (4) IRAS Voluntary Disclosure Programme (VDP) 80

81 IRAS Voluntary Disclosure Programme (VDP) Overview of VDP Qualifying Conditions Aims to encourage taxpayers that have made errors in their tax returns to voluntarily come forward to correct their errors and set their tax matters right, in exchange for reduced penalties Applicable to - Individual Income Tax - Corporate Income Tax - Goods and Services Tax (GST) - Withholding Tax - Stamp Duty Voluntary disclosure must be timely, accurate, complete and self-initiated by taxpayer; Cooperate fully with IRAS to correct the errors made; and Pay or make arrangements with IRAS to pay additional taxes and penalties imposed (if any), and honour such arrangements till all payments are made. 81

82 IRAS Voluntary Disclosure Programme (VDP) Voluntary Disclosure Made Within 1 year from statutory filing date Penalty Treatment No penalty imposed Reduced Penalties > 1 year from statutory filing date Reduced penalty of: 5% p.a. for Income Tax* Flat 5% for GST and Withholding Tax * For Income Tax, reduced penalty is 5% of tax undercharged for each year that income was late in being brought to tax. Stamp Duty: For a voluntary disclosure pertaining to late stamping or underpayment of Stamp Duty that meets the qualifying conditions under IRAS' Voluntary Disclosure Programme, the reduced penalty is 5% p.a. computed on a daily basis on the stamp duty payable. There is no grace period applicable to Stamp Duty. Refer to IRAS website for more information on VDP: Home > Businesses > Companies > Getting it Right > Voluntary Disclosure of Errors for Reduced Penalties 82

83 (5) Record Keeping Requirements 83

84 Record Keeping Requirements Regardless of whether assessment is finalised, records have to be kept and retained for: At least 5 years for financial periods ending on or after 1 Jan 2007 e.g. Records for period 1 Jul 2013 to 30 Jun 2014 (YA 2015) should be kept up to 31 Dec 2019 At least 7 years for financial periods ending before 1 Jan 2007 Records cannot be discarded even if Notice of Assessment is received IRAS may request records for verification purposes 84

85 Record Keeping requirements Estimates of income and expenses are not acceptable for tax purposes Failure to keep proper records: Fined up to $1,000 per Year of Assessment Imprisoned for up to 6 months 85

86 (6) Keeping Your Company s Particulars Up-To-Date 86

87 Keeping Your Company s Particulars Up-To-Date Particulars that must be kept up-to-date: Update Corporate Profile/ Contacts & Alerts Business activity (i.e. SSIC Code) Address of the Company s registered office Company s financial year end (FYE) Why is it important to keep these details up-to-date? Business activity (i.e. SSIC Code) may be used for tax assessment purposes. All Forms and Notices will be sent to the company s registered office IRAS record of your company s FYE can affect: Our record of your ECI due date Our record of whether the company can be accorded the Tax Exemption for New Start-Up Companies 87

88 How to change your Company s particulars Update Corporate Profile/ Contacts & Alerts/ Financial Year End Company s staff or tax agent who have been authorised with an Approver role can also update the company s: contact details (i.e. name of contact person, telephone number and address), and financial year end The contact details and financial year end will be updated immediately upon successful submission View the companies particulars and contact details (e.g. company s status, registered office address, financial year end and telephone number) at mytax.iras.gov.sg For new companies Update your financial year end if it is not 31 Dec 88

89 Company s Business Activity (i.e. SSIC Code) If the company s principal activity has changed such that its business activity (i.e. SSIC Code ) is different from that provided to ACRA at the point of incorporation, please: Inform ACRA via on the change of the company s particulars IRAS at ctmail@iras.gov.sg to inform us the company s new business activity and the effective date of change 89

90 Company s Registered Address View your address at the e-service Corporate Profile / Contacts & Alerts at mytax.iras.gov.sg If the address is not that of your company s registered office, you will need to: Inform ACRA via on the change of the company s particulars. There is no need to inform IRAS separately For urgent updating by IRAS, fax or us (ctmail@iras.gov.sg) the details: Company s tax reference number; Company s name; and Company s new address that has been updated with ACRA 90

91 (7) Enforcement Actions for Non-Compliance 91

92 Enforcement Actions for Non-filing of ECI / Income Tax Return Estimate the company s income and issue an assessment Payment has to be made within one month from the date of Notice of Assessment Any objection to the assessment will be reviewed only upon submission of the tax return Summons the company or director to court Upon conviction, penalties up to $1,000/return may be imposed; $50/day for continuous offence; and even double the amount of tax that the Comptroller may, to the best of his judgment, assess to be payable Refer to IRAS website at iras.gov.sg Businesses > Companies > Filing Taxes (Form C-S/ C) > Late Filing / Failure to File 92

93 Enforcement Actions for Non-payment of Tax Tax must be paid within one month from the date of Notice of Assessment, even if you object to the assessment Failure to pay on time will attract: 5% late payment penalty; 1% Additional penalty/month up to 12%; Agency appointment; Legal action to wind up the company. 93