TO: All clients of
RE: Tax Updates
1 IRAS Circular
“Taxpayer Audit” dated 15 Dec 2003
Taxpayer
Audit is carried out by IRAS’s tax auditors to detect errors so that taxpayers
can be advised on better compliance. It
involves the examination of books and records to verify compliance with tax
laws. In this circular, IRAS outlines
the purpose of taxpayer audit, its scope and process and consequences. Common
errors uncovered in the course of their audits are as follows: –
I Understatement of income as a result
of:
(a) Mistakes
in recording and adding up income earned
(b) Failure to
account for all invoices issued
(c) Failure to
issue invoice/receipt for every sale (including income from ancillary
activities) made
(d) Failure to
account for trading stock taken for private use
(e) Failure to
recognize income on accrual basis
II Overstatement
of purchases & other expenses as a result of:
(a)
Insufficient/no
supporting source documents and records
(b)
Double-counting
or estimation of purchases and expenses
III Wrongful
claims for expenses prohibited under S15(1) of the Income Tax Act
(a)
Motor
vehicles expenses incurred for non-Q plated passenger vehicles or Q-plated
passenger vehicles registered on or after 1 April 1998.
These
motor vehicles expenses e.g. petrol, insurance, repair & maintenance and
parking are not deductible even if they are incurred for business
purposes.
(b)
Private
elements in business expenses e.g. entertainment, refreshment, telephone and
traveling/transport etc.
(c)
Private/domestic
expenses e.g. club membership subscriptions, personal medical bills, CPF
contributions, insurance, traveling expenses for personal trips etc.
(d)
Capital
expenses e.g. costs of assets, renovation, legal & stamp fees, costs of
seminars/conventions for personal development etc.
IV Failure to ascertain the actual
closing stock value
V Failure
to report income from other sources
VI Failure to report employee’s benefit
Measures
to be taken to avoid such errors are also stated in the circular. For more details on this circular, please
refer to http://www.iras.gov.sg.
2 Income
Tax Rate
The
corporate tax rate will be reduced to 20% with effect from Year of Assessment
2005 (financial year ended 2004).
3 Tax Exemption for Foreign-Sourced Income for
Resident Individuals
From
Year of Assessment 2005, all foreign-sourced income received in
4 Tax Exemption for Singapore-Sourced Investment
Income for Individuals from Financial Instruments
From
Year of Assessment 2005, all Singapore-sourced investment income derived
directly by individuals from financial instruments (except standard deposits)
will be exempted from tax.
5 Tax Exemption for Singapore-Sourced Interest
Income for Individuals
Interest
income received by an individual from 1 January 2003 to 31 December 2004 from
standard savings, current and fixed deposit accounts with approved banks and
finance companies in
Interest
income derived by individuals on or after 1 January 2005 from such standard
deposits will be fully exempted from tax.
6 Tax
Exemption Scheme for New Companies
The
first $100,000 of chargeable income (except
Conditions
for a newly incorporated company to qualify for this tax exemption include:
·
it
is incorporated in
·
it
is a tax resident of
·
it
has no more than 20 shareholders throughout the basis period relating to that
Year of Assessment; and
·
all
its shareholders are individuals throughout the basis period relating to that
Year of Assessment.
The above is also available on our website at http://www.philipliew.com.sg and is for general information only. If you have any queries, please do not hesitate to seek our assistance.
April 2004