10 Tax-related Mistakes to Avoid in Singapore

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Maneuvering through Singapore’s tax system can still prove challenging, particularly for individuals and businesses unacquainted with its complexities. 

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To assist you in remaining compliant and sidestepping unnecessary tax-related stress, we have curated a list of the ten most common tax mistakes in Singapore. By comprehending these pitfalls and adopting proactive measures, you can guarantee a seamless journey through Singapore’s tax landscape.

#1 Neglecting to Register for Goods and Services Tax (GST):

If your business’s yearly taxable turnover surpasses S$1 million, it is mandatory to register for Goods and Services Tax (GST). Failure to register or missing the deadline may lead to penalties and fines. Be proactive in monitoring your business turnover and register for GST when you approach the threshold to avoid any compliance issues.

#2 Mishandling CPF Contributions:

Employers must make Central Provident Fund (CPF) contributions to eligible employees. Incorrectly calculating or under-reporting CPF contributions can lead to penalties and investigations. Familiarize yourself with the CPF contribution rates and ensure accurate calculations to stay in line with the regulations. Consult a tax expert in Singapore to know more about managing CPF contributions. 

#3 Incorrect Classification of Workers:

Misclassifying workers as employees or independent contractors can have significant tax implications. Employees are subject to different tax treatment and CPF contributions than independent contractors. Understand the criteria that differentiate employees from contractors and classify workers appropriately to prevent potential disputes with the authorities.

#4 Not Declaring Foreign Income:

Singapore implements a territorial tax system, where taxation applies solely to income earned in or derived from Singapore. Nevertheless, residents are required to include foreign income in their tax returns. Failure to declare such foreign income may lead to penalties and be classified as tax evasion. It is essential to maintain precise records of all foreign income and ensure proper reporting in your tax filings. Get in touch with a tax advisor in Singapore to know more about declaring your foreign income.

#5 Overlooking Tax Deductions and Reliefs:

Singapore offers various tax deductions and reliefs to individuals and businesses, such as the Productivity and Innovation Credit (PIC) scheme or personal reliefs for individuals. Not taking advantage of these deductions and reliefs means paying more tax than necessary. Stay informed about available tax incentives and incorporate them into your tax planning strategies.

Recommended post: 10 Tax deductions in Singapore every tax payer should know about

#6 Missing the Deadline for Income Tax Filing:

Income tax filing deadlines are strictly enforced in Singapore. Failing to file on time can result in late filing penalties. Plan ahead, gather all necessary documents, and submit your tax return well before the due date to avoid any last-minute rush.

#7 Inadequate Record-Keeping:

Maintaining comprehensive and organized records is crucial for accurate tax reporting. Whether you’re an individual or a business, keep records of income, expenses, and supporting documents for at least five years. Digitize your records to ensure their accessibility and safeguard against loss.

#8 Ignoring the Tax Implications of Investments:

Investments can have tax implications, such as capital gains tax or tax on dividends. Understand the tax treatment of various investments and plan your portfolio accordingly. Seek advice from a tax professional to optimize your investment strategy while minimizing tax liabilities.

#9 Not Utilizing Double Taxation Agreements (DTAs):

Singapore has an extensive network of Double Taxation Agreements (DTAs) with various countries to avoid double taxation on income. Failure to leverage these agreements can result in paying more tax than necessary, especially for international businesses. Check if your income is eligible for DTA benefits and claim them accordingly.

#10 Mishandling GST Input Tax Claims:

Businesses registered for GST can claim input tax on eligible purchases. However, errors in claiming input tax or attempting to claim input tax on non-qualifying expenses can lead to penalties and audits. Maintain proper documentation for all GST input tax claims and ensure compliance with GST rules.


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ACRA Cancels Registration of Filing Agent and Qualified Individual for AML/CFT Breaches

The Accounting and Corporate Regulatory Authority (ACRA) had cancelled the registrations of filing agent (RFA) and qualified individual (RQI) on 18 January 2024. The registrations were cancelled in view of breaches of anti-money laundering and countering the financing of terrorism (AML/CFT) controls under the ACRA (Filing Agents and Qualified Individuals) Regulations 2015 (the “ACRA Regulations”).

Some of the basic AMT/CFT controls that a RFA and RQI are required to exercise are as follows:

(a) perform additional customer due diligence measures when a customer is not physically present during onboarding;

(b) inquiring if there exists any beneficial owner in relation to some of its customers; and

(c) perform risk assessments i

RQIs and RFAs provide corporate secretarial services for business entities, such as helping customers to incorporate companies, file annual returns and fulfil other filing requirements under the Companies Act 1967 or other Acts under ACRA’s purview. RQIs and RFAs are required to perform customer due diligence measures in accordance with the ACRA Regulations, and conduct their business in such a manner as to guard against the facilitation of money laundering and the financing of terrorism. RQIs and RFAs must also satisfy statutory requirements such as being fit and proper persons, to be registered or continue to be registered.

RQIs and RFAs who breach their statutory obligations may be subject to enforcement actions, such as financial penalties of up to $10,000 or $25,000 per breach respectively or have their registrations with ACRA suspended or cancelled.

Therefore, RQIs and RFAs play an important role in helping to detect and combat illicit activities.

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