Getting individuals to comply

More than 96% individuals file their tax returns on time.

Given that the statutory record-keeping period has been reduced from seven to five years, and that filing of tax returns is an annual obligation, it is important that individuals file their tax returns promptly to ensure timely finalisation of their tax matters.

You will be required to submit your Income Tax Return if:

• you have received an income tax form or a notification via SMS/ letter from IRAS informing you to file your Income Tax Return;
• your total income in the preceding year is more than $22,000;
• your net trade income (i.e. gross earning minus allowable business expenses) is more than $6,000; or
• you are a non-resident who derived income from Singapore.

This is regardless of whether your employer or third-party intermediaries have submitted your income information to us.

If you are on the No Filing Service (NFS), you are not required to file a tax return. However, if you have additional income to declare, or changes to be made to your tax reliefs, you can make the relevant changes by e-Filing your tax return before the filing due date. Alternatively, please inform us within 30 days from the date of the tax bill, if you have any income not shown in your tax bill or if your tax relief claims are incorrect.

Do note that late/ non-filing of tax returns may attract penalties.

To ensure on time filing for individuals, employers who are under the Auto Inclusion Scheme (AIS) are reminded to transmit their employees’ income details on time to us to avoid inaccurate tax bills and delayed tax assessment due to missing data on pre-filled tax return.  Non-AIS employers have a statutory obligation to prepare the Form IR8A and Appendix 8A, Appendix 8B or Form IR8S (where applicable) for employees who are employed in Singapore.

Common errors made by employers include:

1. Incorrect reporting on benefits-in-kind, particularly for foreign-owned companies who have sent overseas employees to work in Singapore;
2. Under reporting of gains from the exercise of stock options and not applying the ‘deemed exercise’ rule for foreign employees who ceased employment in Singapore;
3. Omission of taxable benefits such as gifts worth more than $200 and staff discounts worth more than $500.

Employers are reminded that submission of inaccurate income information is an offence and may result in a penalty of up to two times the amount of tax undercharged. IRAS encourage employers to voluntarily disclose past errors or omissions in their employees’ tax reporting in a timely manner. By doing so, they may qualify for penalty reduction under our IRAS Voluntary Disclosure Programme.

IRAS adopts tools such as segment profiling and modelling to help in the risk identification and analysis of AIS employers that are more likely to make errors in their employees’ remuneration reporting.  Appropriate early intervention includes upstream assurance programmes targeted at employers’ internal controls and potential risk factors to ensure the accuracy of data transmitted, coupled with downstream audit programmes to deter and prevent occurrence of errors, minimise reporting risks and maximise compliance.

Generally, we focus our compliance efforts on businesses and professionals who have higher levels of cash or paper transactions and poor record-keeping practices as they pose a higher non-compliance risk. Businesses and professionals with exceedingly high claims of expenses will also be scrutinised.

To aid these businesses and professionals to better comply with their tax obligations, we have put in place a series of compliance programmes ranging from educational and engagement activities to the conduct of audits to review the completeness and accuracy of tax reporting.

IRAS sees a growing trend of high-income individuals seeking to avoid taxes through corporatisation, i.e. by setting up companies to book their personal service income. This is because the Corporate Income Tax rate of 17% is 7% points lower than the top marginal Individual Income Tax rate of 24% from YA 2024, and companies can also benefit from the Start-up Tax Exemption Scheme (“SUTE”) / Partial Tax Exemption Scheme (“PTE”).

A tax avoidance arrangement normally involves an arrangement that is artificial, contrived or has little or no commercial substance. Such an arrangement is typically designed to obtain a tax advantage that is not intended by Parliament.

Some examples of tax avoidance arrangements observed by IRAS include:

1. Setting-up more than one company for the same business;
2. Assigning income earned through personal efforts to a shell company; and
3. Changing the business structure from sole-proprietorship/ partnership to company for the sole purpose of obtaining a tax advantage.

The Comptroller will disregard and make relevant adjustments to arrangements which are carried out with tax avoidance as one of their main purposes and are not for bona fide commercial reasons.

For more information, you may refer to the circular (PDF, 364KB) which provides some case studies to illustrate common business arrangements that may give rise to tax avoidance concerns. It also lays out IRAS' approach in dealing with such business arrangements.

IRAS has been issuing query letters to individuals who have purchased high value assets, to check on their source(s) of funds for the acquisition.

The objective of the letter is to create awareness among such individuals to be more mindful of their Individual Income Tax matters, as well as to identify individuals who may not seem to have the income level to support these purchases.

IRAS may also inform such individual taxpayers to review their income declaration to ensure that they have duly declared all income.

* Related parties include your spouse, parents, children, siblings, relatives, etc.