Audits on individuals by IRAS

Purposes of audit

These are the purposes of IRAS's tax audit programme:

1. Ensure your business' tax returns are in compliance with the tax law;
2. Educate your business on tax obligations and how to comply; and
3. Identify tax laws, policies and processes where we can simplify or clarify.

What to expect during an audit

Audits are conducted by examining your accounting books, records and financial affairs to verify that income tax returns submitted are in compliance with tax laws.

Notification of audit

We will inform your business of the audit by letter, email or telephone call. IRAS will provide the details such as the documents/books that IRAS will examine, and the Years of Assessment (YA) to be audited. IRAS has the discretion to extend our audit scope beyond those set out in the communication.

Audit methods and requirements

An audit can be conducted via emails, letters and telephone interviews. We may also visit your premises or request to meet your key personnel and/ or employees.

Field visits by IRAS officers

Usually, field visit is conducted by a team of three to four tax officers who carry authority cards issued by IRAS. If you need confirmation on the identity of the officer, please call IRAS at 6351 2044 or 6351 2046.

1. Initial interview

IRAS officers usually start the field visit with an initial interview to obtain the following background information:

1. Size and nature of your business;
2. Operations of your business;
3. Organisational structure including duties of key management personnel; and
4. Accounting and book-keeping procedures and internal control procedures of your business.

2. Examination of documents

The types of documents or records to be reviewed can include:

1. Source documents that substantiate all transactions in your business, e.g. receipts, invoices, vouchers, and other relevant documents issued or received from customers/suppliers;
2. Accounting records and schedules - manual or electronic records of assets and liabilities, revenue and expenses, gains (profit) and losses. Where accounting information is stored in electronic format, you are advised to make the information available on the date of visit;
3. Bank statements of business bank accounts and personal bank accounts, if required; and
4. Any other records of transactions connected with your business.

Usually, the examination of accounting books and records would be conducted by a team of two to four tax auditors. Some of your accounting records and books might be retained by our auditors for further review.

3. Length of field visits

The length depends on your business' standard of record keeping, the degree of compliance, the scope of the audit and your level of co-operation. The process may last from a few hours to a day.

4. Re-visits

If the requested information or records are incomplete or unavailable, the auditors might re-visit the business premises on another arranged date.

5. Information from third parties

We may seek confirmation or obtain information from third parties. In the absence of sufficient records, we will refer to available sources of information to best estimate the financial conditions of your business.

Expense claims or other claims, e.g. capital allowance, may be disallowed in the event of insufficient supporting documents.

Responsibilities of taxpayers

During the audit, we will require your co-operation in the following ways:

1. Provide us with full access to your premises, records and documents;
2. Make available a room or working space for the auditors to conduct the examination of books and records;
3. Allow us to interview your employees;
4. Allow us to make copies/ obtain extracts of records and documents;
5. Provide timely, complete and accurate replies to our requests for information; and
6. Be truthful and honest in your dealings with us - full disclosure of irregularities and omissions should be made at the earliest possible time.

Conclusion of audits

Most audits are completed within 12 months. The progress of an audit depends on the standard of record keeping, the scope of audit, and the support and cooperation of the business and tax representatives.

1. Communicating and discussion of the findings

We usually communicate the outcome of the audit by writing or through a meeting at IRAS.

If any adjustment(s) is to be made to your tax assessment(s), we will explain the basis of our adjustment. Issues are discussed with a view to reach a mutually acceptable conclusion. We will also advise on areas in which you could make improvements to better comply with the tax laws.

2. If errors are discovered

Should the audit conclude that errors had been committed, IRAS will issue the Notice(s) of Additional / Amended Assessment and an Offer of Composition.

3. Objection to the Notices of Assessments / Offer of Composition

Businesses that disagree to the Notices of Additional Assessments must object in writing within 30 days, stating the specific grounds of objection. Notwithstanding any objection, the tax payable must be paid within one month from the date of the Notice of Assessment.

Improving compliance with tax laws

To improve compliance with tax laws, your business is encouraged to:

1. Engage personnel with sound income tax knowledge (e.g. have attended Income Tax Courses conducted by the Tax Academy) and adequate experience;
2. Practise good record-keeping;
3. Use computerised accounting system. You may refer to the Accounting Software Register Plus (ASR+) Listing for a list of accounting software where the software developers have been reviewed to ensure that the accounting software is compliant with IRAS' technical requirements.
4. Have good internal controls; and
5. Conduct periodic reviews of your returns and disclose any error voluntarily. For a start, you may go through the "List of common errors made". Penalty can be reduced for a mistake reported voluntarily which meets the qualifying conditions under IRAS' Voluntary Disclosure Programme.

Past audit activities and results

For details, please refer to:

• Recent prosecutions
• Compliance focus on individual taxpayers