The Inland Revenue Authority of Singapore (IRAS) recently issued a reminder to all companies that have yet to e-file their Corporate Income Tax (CIT) returns for the Year of Assessment 2024 (YA2024).
IRAS highlighted that approximately one in ten companies fail to meet their filing obligations each year, despite receiving multiple reminders. Missing the deadline can lead to significant penalties.
With the submission deadline set for 30 November 2024, it is critical for businesses to ensure timely compliance. In this guide, we offer ten practical tips to help you efficiently manage their YA2024 tax filing obligations.
1. Provide a full set of financial statements
Companies are required to prepare a full set of financial statements in accordance with the Singapore Financial Reporting Standards (FRS). This includes comprehensive income statements, balance sheets, and cash flow statements, which are essential for accurate tax reporting.
2. File the correct Income Tax Return (ITR)
Given that there are three different types of ITRs: Form C, Form C-S, and Form C-S (Lite), filing of the correct ITR is crucial. Companies filing the simplified tax returns such as Form C-S or Form C-S (Lite) should ensure that they satisfy the eligibility criteria. Accurate completion of these ITRs would help to avoid penalties and ensure compliance.
3. Engage an accredited tax agent
One of the fields to be completed in the tax return is whether the ITRs have been reviewed by an accredited tax practitioner or advisor. Having your ITRs filed or reviewed by an accredited tax professional would give IRAS the assurance on the accuracy of the ITRs filed. In addition, accredited tax professionals are in a better position to help you navigate the complex tax regulations, optimise your tax position, and ensure compliance with all filing requirements.
4. Prepare adequate supporting documents
IRAS requires all businesses to keep proper and adequate supporting documents or receipts to support the deduction claims of expenses. This includes keeping detailed records of business expenses, which can be crucial during audits. For example, if the company has substantial business entertainment expenses, in addition to the receipts/invoices, the company should also include details/names of the persons/clients who were entertained.
5. Comply with withholding tax obligations
Certain specific payments such as interest, royalty, service/technical fees, lease payments made to non-resident persons (companies and individuals) may attract withholding tax. If there are such payments, it is important the company has complied with the relevant withholding tax obligations. Failure to do so or late filing may result in penalties of up to 20% being imposed on the company. If you are unsure, speak with your tax agent on this.
Where the company has applied reduced rates under the double taxation agreement (DTA), it is required to submit the certificate of residence (COR) to IRAS within the due date. Failure to do so will result in IRAS reinstating the withholding tax to domestic rates and imposing penalties on the shortfall.
6. Maximise tax deductions
Certain business expenses may qualify for additional or further deductions. For example, cash donations to approved charities qualify for 250% deduction while qualifying expenses incurred on overseas travel for trade fairs or exhibitions, registration of intellectual properties qualify for an additional 100% deduction. Companies may wish to consult tax professionals regarding the claims and ensure that documents are adequate and proper to support these claims of tax deduction.
7. Tap on the new Enterprise Innovation Scheme (EIS)
This is a new tax incentive scheme that takes effect from YA2024. Businesses that incur qualifying expenses on the following activities under EIS will be eligible for enhanced deductions or allowances of 300% on the first $400,000 of qualifying expenditure as follows:
- Qualifying R&D undertaken in Singapore
- Training expenses (courses under SkillsFuture Singapore)
- Registration costs of intellectual properties
- Acquisition or licencing costs of intellectual property rights
- Innovation projects with six designed tertiary institutions
Companies may wish to discuss with tax professionals on their eligibility to claim the EIS deduction/allowances where they have incurred any of the above qualifying expenses during the year of 2023.
8. Claim accelerated capital allowances on fixed assets
Companies that incurred qualifying capital expenditure, on fixed assets for use during the year 2023, can claim accelerated capital allowances over two years instead of three years under the default rule. The claim is over two years, with the first claim at 75% of costs in the first year and 25% of the remaining costs in the second year.
9. Claim start-up tax exemption for newly incorporated companies
Newly incorporated companies with at least one individual shareholder holding 10% equity are eligible for the startup tax exemption on the first SG$200,000 of taxable income. The maximum amount that is exempted on the first SG$200,000 is SG$125,000. The excess taxable income will be subject to tax at 17% flat.
10. Register for the Goods and Services Tax (GST)
Taxpayers should monitor their turnover closely if it will exceed the SG$1 million threshold which will then require compulsory GST registration. In cases where the business is making more 90% of its total sales to overseas customers, it may choose to apply for GST exemption.
Businesses that have turnover less than SG$1 million may also choose to register for GST on a voluntary basis. A cost benefit analysis should be done before doing so.
Next steps
By following these tips, you can ensure a smooth and efficient tax filing process for YA 2024. You can also read our comprehensive guide on tax and accounting in Singapore.
Hawksford has an experienced team in Singapore to assist you with various tax matters, ensuring that you meet all your tax filing obligations accurately and on time. If you have any questions or need further assistance, do not hesitate to reach out to us.
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