The Inland Revenue Authority of Singapore (IRAS) has successfully recovered S$79 million in taxes and penalties over the three-year period from July 2020 to June 2023. This recovery stems from audits of companies that submitted inaccurate corporate income tax returns for the assessment years 2019 to 2021.

According to IRAS, the audits revealed a range of common tax-filing mistakes, particularly the understatement or omission of income due to incomplete revenue recording. Many companies, especially in the food and beverage sector, neglected to report earnings from sales made through food delivery platforms, while construction firms often failed to declare income from scrap material sales.

Two-thirds of the audits were conducted through IRAS’s compliance audit programs, utilizing advanced data analytics tools, while the remainder were identified through random sampling and qualitative methods, including environmental scanning and tip-offs. The findings pointed to poor record-keeping practices, particularly in family-owned businesses. Many of these firms lacked sufficient documentation to support their claims for purchases and expenses, leading to inaccuracies in their tax filings.

In addition to revenue reporting errors, IRAS found that some companies did not maintain a clear separation between business and personal expenses, which further complicated their tax situations. Other prevalent issues included incorrect claims for capital allowances on assets not qualifying as “plant and machinery” and a failure to apply the arm’s-length principle in related-party transactions.

Moreover, some companies failed to charge related parties for services rendered, or they charged significantly lower rates compared to what they would apply to unrelated entities. The IRAS’s audit efforts underscore the importance of accurate record-keeping and adherence to tax regulations to avoid penalties and ensure compliance.

As Singapore’s tax authority continues to enhance its audit capabilities and compliance measures, it remains crucial for businesses to be vigilant in their tax filings to mitigate the risks associated with erroneous submissions.