This article aims to explain the topic of Inland Revenue Authority of Singapore (IRAS) in detail for our readers and to bring in more clarity regarding the functioning of the authority. It describes the role of IRAS along with informing readers about the compliance requirements mandated by the regulatory body regarding tax collection in Singapore. We will also be discussing about the unique characteristic of tax structure in Singapore and what it implies for companies, businesses and economy in the country.
WHAT IS IRAS?
IRAS, also known as Inland Revenue Authority of Singapore is a regulatory body under Ministry of Finance of the Government of Singapore which deals with collection of taxes and also acts as a chief tax advisor to the government.
THE ROLE AND RESPONSIBILITIES OF THE IRAS
Any question pertaining to taxes that an individual, or a company or even a country might have on this subject is dealt by Inland Revenue Authority in Singapore. However the two primary functions performed by the authority are broadly classified as collecting all types of taxes and acting as a chief tax advisor to the government of Singapore.
- Collection of taxes
While performing the central role of a tax collection body, IRAS collects the following type of taxes –
- Income tax — a tax charged on the income of individuals and companies.
- Goods and Services Tax (or GST) — a value added tax levied which is levied on imports as well as on consumption of goods and services. It’s usually included in price and charged by supplier of goods and services.
- Property Tax — applied to any property owners, based on the expected rental value of the properties.
- Stamp Duty for Property
- Stamp Duty for Property-Holding Entities
- Stamp Duty for Shares
- Withholding Tax
- Trust
- Estate Duty
- Private Lotteries Duty
- Betting and Sweepstake Duties
- Casino Tax
- Clubs and Associations
- Charities
- Dividends, capital gains and inheritance are not to be taxed.
IRAS constitutes a major support to the countries’ economic and social programmes as taxes collected by governing body accounts for about 70% of the government’s operating revenue, a large sum of which goes to these programmes and initiatives.
- Functioning as the chief tax advisor
IRAS with its second role as chief tax advisor to the government also performs tasks which includes drafting the tax policies, aid Finance ministry in drafting of tax legislation and along with helping in draw tax treaties for the country. For example Singapore has now close to hundred agreements with other countries in relation to double taxation, which helps in preventing people from paying double taxes on their income.
WHAT MAKES SINGAPORE’S TAX SYSTEM DISTINCT?
Singapore’s tax system is based on what is known as territorial tax system, wherein the tax that company pays are based on where profits come from, not where the company is registered. For better understanding of the concept, here’s an example:
Paul and all his clients are based in France however his construction engineering company is registered in Singapore. He issues bills for them in France and in exchange they pay money to his company’s bank account in France. The only profit money that reaches Paul’s bank account in Singapore advances from his company expenses, which is the only sum of money that gets taxed by IRAS.
A Brief History Of IRAS
While IRAS as the governmental body came into existence in 1992. It has its history rooted in 1947 when Singapore Income Tax Department was established to deal with both individuals as well as corporate tax returns. The year 1960 then witnessed the formation of the Inland Revenue Department, which is seen as paving way for the creation of IRAS, as the latter came into existence to replace the former in its functions in 1992.
How To Connect With IRAS And Know Your Tax Status
Irrespective of whether you are an individual or a business corporation, in order to track down your tax status, you must sign in to personal account of IRAS which is named as myTax Portal. In case you enter your individual account, you will be required to have your SingPass ID and a CorpPass ID in case of a business account.
It is possible for you to connect your accounting software to IRAS, however, the accounting software in this case must meet the technical requirements set up by IRAS and also must make it to the list of approved software.
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Contacting With IRAS Is -TECH Easy
IRAS with its digital accessibility has made it easier for individuals and companies to contact with the regulatory body.
- You can visit the website of IRAS
- Login to IRAS
- Contact to IRAS hotline
As IRAS is making technical progress along with the digital age – the user can always approach Virtual Assistant “Ask Jamie” who appears in the right corner of the IRAS website for assistance and is designed to further ease the process of interaction with the taxpayers.
COMPLIANCE REQUIREMENTS OF IRAS FOR COMPANIES IN SINGAPORE
There are some mandatory requirements for companies to stay compliant with Inland Revenue Authority of Singapore. These are the requirements one must meet to comply with the IRAS:
- Each company must submit an ECI for the YA within 3 months as soon the financial year ends. An Estimated Chargeable Income (ECI) is an estimate of the company’s chargeable remuneration for a Year of Assessment (YA). It is compulsory for the company to file an ECI regardless of the income. The company will file a ‘NIL’ ECI in case of zero income.
- It is mandatory for all Singapore companies to prepare Accounting Records, which must comprise of a Profit & Loss Account, Balance Sheet, Cash Flow Statement and an Equity Statement which is in accordance with Singapore Financial Reporting Standard (SFRS). The accounting records must be kept for years.
- Tax returns must be filed too. The deadline for filing for corporate income tax return is 30 November. Documents to be submitted are audited or unaudited Report and tax computation (Form C).
- It is mandatory for each company to submit a Financial Report. The report must consist of financial statements such as a balance sheet and income statements, supporting notes and disclosure of significant accounting policies applied by the company, disclosure of the company’s operations, and shareholders’ and directors’ interests.
- If a Company has a corporate shareholder, sales turnover that exceeds S$5 million or it has more than 20 shareholders, then it must submit an audited report.
CONCLUSION
While performing its main functions as tax advisor for the government and to collect taxes, IRAS has ensured competitive tax levels along with making the process of tax collection easier. These measures, in turn then provided a boost to the Singaporean economy as taxes collected by the body contributes significantly to social and economic programmes of the country. IRAS with its digital access has brought ease in burden of tax reporting for companies incorporated in Singapore and for residents of the country. Along with it, IRAS has also aided in drafting tax agreements which prevents citizens from getting taxed twice and thus help in reducing their economic burdens.
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FAQ’s
Yes. All Singapore private limited companies must comply with the requirements of Inland Revenue Authority of Singapore (IRAS), failing of which the company can face the consequences. Filings are mandatory for both active and dormant companies.
Failing to comply with the above requirements mandated by IRAS will lead to a company facing a penalty or a court persecution.
