The tax basis period is the calendar year; however, for business profits, the accounting period will generally be adopted.
Tax is computed for each tax year based on the income earned in the preceding year (the tax basis period). The corporation files an estimate of its income within three months of the end of the accounting period followed by a return of income by 30 November of the tax year, and the tax is assessed by the Comptroller of Income Tax. Mandatory electronic filing of tax returns will be introduced gradually. Certain companies were required to file electronically from year of assessment 2018 (income year 2017). By year of assessment 2020 (income year 2019), all companies are expected to have adopted electronic filing. There is no fixed date for the issue of assessments.
Payment of tax
Assessed tax is payable within one month after the service of the notice of assessment, whether or not a notice of objection to the assessment has been lodged with the tax authorities. Application may be made to the Comptroller to pay estimated tax liabilities on a monthly basis. However, the Comptroller is under no obligation to grant such an application.
Late payment of tax will attract penalties, up to a maximum of 17% of the outstanding tax.
Tax audit process
The IRAS adopts a risk-based approach to identifying compliance risk, with a focus on improving the behaviour of taxpayers who pose a higher risk of non-compliance. It also prioritises and tailors specific compliance programmes that aim to identify taxpayers who have made mistakes in their tax returns, create an audit presence in the community to deter non-compliance by other taxpayers, educate taxpayers on their tax obligations and how to comply with these, and identify areas of tax law, policies, and processes where the tax system can be simplified.
Statute of limitations
The statute of limitations is four years from the year of assessment, but does not apply where there has been fraud or wilful default by the taxpayer.
Topics of focus for tax authorities
In the past, the IRAS has focused its compliance efforts on the following:
- The timely filing of corporate tax returns.
- Productivity and Innovation Credit (PIC) claims. Note that this scheme expired after the year of assessment 2018.
- The classification of income and expenses for income taxable at concessionary and prevailing corporate tax rates.
- Group relief claims.
- Tax exemption for foreign-sourced dividends.
- The recognition of income from construction contracts and provisions claimed by construction companies.
The IRAS has announced that, in addition to the above, it will be focusing on the following:
- Car dealers.
- Private hire car operators.
- Food and beverage establishments.
The IRAS is currently focusing its GST audit and investigation efforts on businesses involved in Missing Trader Fraud arrangements.