Inland Revenue Authority of Singapore is the government organization that is mandated to collect corporate and income tax in Singapore. As a fully registered company in Singapore, you are required to file tax returns at the end of every financial year. Today, we look at four common mistakes that companies make when filling tax with IRAS.
Employee Income Tax Borne by Employer
If you happen to withhold one of your employee salary pending tax clearance you should not mark the box labeled “Income Tax Borne by the Employer” in the Form IR21. This is because the tax is only borne by you (the employer) if you are responsible the tax liability of the said employee. The amount of tax liability is considered a form of taxable component for the employee.
Withholding Money Pending Tax Clearance
If an employee submits his or her resignation letter on payday while you have already paid his previous month’s salary, you are required to withhold the employee last month salary for purposes of tax clearance.
Failing to do so will make your company liable for tax payable by the employee thereby exerting unnecessary financial pressure on your company. Concisely, you are required by law to withhold all the money due to the employee from the day that he notifies you of his intention to resign from your company.
Declaring Employment Income
For example, if one of your employees worked in the company from 1 November 2015 to 31st May 2016 and his monthly income is S$6,000, you should not indicate the total amount of S$42,000 under “year of cessation” column.
Instead, employee’s income should be reported separately for each financial year. That is;
- Year of Cessation (1 January 2016 to 31 May 2016) – Income (S$30,000)
- Year before Year of Cessation (1 November 2015 to 31st December 2015) – Income S$12,000
Changing Details after Filing
If you happen to make errors when reporting income for your employees, you are required to fill and submit the “Amended” form IR21. This will make the previous original IR21 form void. You also need to cross the “Amended” box and indicate the date that the original Form IR21 was filed to avoid any confusion.
One of the surest ways of avoiding these mistakes is by going through all the documents to ensure that they are accurate. You could also outsource this task to an accounting firm that has the necessary skills and understanding of IRAS regulations. Note that failing to file tax is an offense that could lead to penalties and possible termination of licenses as well as work permits.