Every business in Singapore is mandated by law to file and pay taxes. The Inland Revenue Authority of Singapore (IRAS) sets the corporate tax filings due date as the 30th of November each year. You can either do this on your own or appoint a corporate tax filing agent to do it on your behalf. To ensure businesses comply with the directives, penalties are put in place for late or defaulting companies.
Penalties for Late or Non-filing of Corporate Taxes
As a business in Singapore, you’re expected to file Form C/C-S, financial statements, and tax computation. According to IRAS, any defaulting company can be subject to one or more of these penalties, depending on the severity of non-compliance.
- IRAS sends an estimated Notice of Assessment (NOA)
- A composition fee of not more than $5,000
- Be issued a Section 65B(3) notice
- Summoning the director of the business
When You Receive an Estimated NOA
When you fail to file your corporate taxes on or before the deadline, IRAS takes the initiative by sending you an estimated Notice of Assessment (NOA). Since IRAS is unable to calculate the exact corporate tax payable for the year, they would have to estimate what the amount would be. They do this by comparing the average tax payable by businesses similar to yours. When this estimate is computed, they will send it to your business as an estimated NOA that indicates the amount you need to pay.
What should you do with an estimated NOA?
The first thing to do when you receive an estimated NOA is to pay up as quickly as possible. Consider it both a reminder and warning from IRAS for not filing your corporate taxes on time. More often than not, this estimated NOA would be higher than your actual tax.
IRAS has already made provisions in case any dispute arises, but before you proceed to that step, pay the estimated NOA in full first. With regards to disputes, IRAS does allow businesses to raise an objection to the estimated NOA. This usually means you do acknowledge that you have failed to file your corporate taxes, but the amount in the NOA is way above what you should be paying.
By paying the NOA immediately and raising an objection later, IRAS can quickly revise and make a refund of any excess payment if your appeal is accepted. For NOAs issued after Jan 2014, IRAS allows for two months from the day the NOA was given for you to file an objection.
When You Receive a Composition Fee
If you fail to file your taxes and make payments after an estimated NOA has been issued, IRAS will make an offer of composition to your business. This is IRAS’s way of not pushing for prosecution but still looking to notify you to make payment for your tax. IRAS would send a notice of the composition fee along with the outstanding tax return documents.
However, the composition fee will not exceed $5,000. The chosen amount would largely depend on your business tax filing compliance in previous years. For example, if this is the first time your business is defaulting, you’ll receive a lower composition amount than if your business is a regular defaulter.
What should you do with a composition fee?
To avoid harsher penalties, make payments for the composition fee, file all documents, and also settle all outstanding taxes. All these must be done immediately for you to avoid getting prosecuted.
When paying the composition fee, clearly quote the payment slip number and pay through the IRAS-approved payment portal. Payment is often processed after three working days.
IRAS allows businesses to appeal for a waiver of the composition fee. However, this will only be considered if you’re in good standing with filing your tax returns on time in the past two years. You should also have submitted all tax-related documents and all necessary tax returns.
When You Receive Notice Under Section 65B(3) of the Income Tax Act
Suppose, at the expiration of the offer of composition, you have yet to file your tax returns and documents. In that case, IRAS will issue a letter to you (as the business director) under section 65B(3) of the Income Tax Act. This is IRAS’s way of using the law to compel you to submit all required documents and information for tax returns.
What should you do when issued a Notice Pursuant to Section 65B(3) of the Income Tax Act?
Unless you want to be summoned to court, you should immediately provide all documents and information requested before the expiration date. This must usually be done within 35 days. Additionally, you should make payment for all outstanding composition fees and taxes.
If for whatever reason, you fail to make payments and file the necessary documents, IRAS will institute its harshest penalty for late tax filing.
When You are Issued a Summon Notice
Evidently, your business has refused to respond to any of IRAS’s attempts to compel you to pay. Therefore, you, as the business director or owner, would be charged in court. This is IRAS’s way of using the long arm of the law to compel you to pay.
What should you do when you receive a summon notice?
You’re allowed to submit all documents and make payments for taxes within a week before the court date. These payments will include those for the NOA and composition fee.
Failure to do this within a week before the court date means the business director or a company representative must appear in court. You can appeal for a postponement of the court hearing. Still, the director or the representative must be sure to appear in court on the original court date to present a Letter of Authorization appealing for postponement.
If the director or representative again fails to appear before the court, the state will take further legal action by issuing a warrant for the company’s director’s arrest.
A fine not exceeding $5,000 will be imposed if the court finds the company guilty. If the director is also found guilty of failing to respond to the Notice Pursuant to Section 65B(3) of the Income Tax Act, he or she faces a fine of up to $10,000 or 12 months of imprisonment. The court can also slap the director with both penalties simultaneously.
As a business owner in Singapore, it’s vital to make yourself aware of all the statutory requirements you need to meet and also comply with all stipulated corporate laws. An important corporate law to adhere to is corporate tax law.
Companies are required to file taxes before the 30th of November for each year. Failure to do this or a late filing attracts penalties. These penalties are put in place by IRAS as reminders and punishments for late filing of corporate taxes. Continuing to default despite these penalties can lead to a $10,000 fine for the company’s director, 12-month imprisonment, or both.
Why go through all this trouble when you have Timcole to help manage and file your corporate taxes. Contact us today to always stay compliant and never miss a deadline.