Tax Obligations of Self-Employed Persons - IRAS€¦ · • Obligations as a Self-Employed Person...

Subject HeadingSubject Heading

Tax Obligations of Self-Employed Persons

Subject Heading

• Obligations as a Self-Employed Person

• Keeping Proper Records

• Filing Income Tax Returns

• Avoiding Common Errors

• Seeking Assistance

• Penalties

• IRAS’ Voluntary Disclosure Programme

Agenda

2© 2017 Inland Revenue Authority of Singapore. All rights reserved.

Subject Heading

Obligations as a Self-Employed Person

3

Subject HeadingKnow Your Tax Obligations

4

Comply with Income Tax

Laws

Keep proper records & accounts

for 5 years

Submit Form B / P on time

Report a complete & accurate set of business income

Register for GST if your business revenue:• exceeded $1 million a year, or• is expected to exceed $1 million a year.

© 2017 Inland Revenue Authority of Singapore. All rights reserved.

Subject HeadingMedisave Contributions

5

• Compulsory to contribute to Medisave if:

• IRAS will issue a Notice of Computation (NOC) toinform you of your Medisave contributions.

You are a self-

employed person

You are a Singapore Citizen or Permanent Resident

Your yearly net trade income is more than $6,000


Subject Heading

Keeping Proper Records

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Subject HeadingTypes of Records

7

Any other supporting records relating to your business

Source DocumentsAccounting Records &

Schedules

• general ledger• debtors and

creditors ledger• purchase and sales

book• cash books• sales listings/

records of dailytakings

• balance sheet andprofit & lossstatement)

• business contracts• notes of board

meeting/ AuditCommittee Meeting

• receipts, invoices,vouchers issued orreceived

• delivery notes• credit and debit

notes• Import and export

documents• bank statements


Subject HeadingBusiness Records

8

Income Records

Purchase & Expense Records

Assets and Stocks

Separate Bank Account


Subject Heading

Records of revenue, fees or commission received fromsale of goods or services provided include:

Income Records

9

Receipt Book Invoices IssuedCredit notes for returned goods

Books to record goods taken for

private consumptionCustomers’ records

Refunds made to customers


Subject HeadingPurchase & Expense Records

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To obtain invoices / receipts when paying for purchases or expenses. Good practice to arrange such payment through the business bank account.

• Cash receipts to beretained even thoughthe amount is small.

• To providedescription if receiptdoes not indicateitems bought

• When receipt is notissued, to preparepayment voucher withacknowledgement.

• To also maintainpurchase / expenserecord book withdetails.

• For GST registeredbusiness, to maintainproper tax invoices asrequired ( refer to GSTe-Tax Guide).


Subject HeadingAssets and Stocks

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Assets

Prepare a fixed asset scheduleat the time you start yourbusiness to record the assetspurchased.

Keep documents such ascontracts of purchase or salesand invoices.

Stocks

Refers to anything purchased for the purpose of sale

Carry out a physical stockcount at the end of theaccounting year.


Subject Heading

• Maintain separate bank accounts for business andpersonal purpose.

• The business bank account should be used solely forbusiness purpose.

• Retain all business related bank statements.

Bank Account


Subject HeadingHow to Keep Records

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Manual Records

Recording your business transactions in a physical form.

Electronic Records

Through the use of a computer and/or accounting software.

Source documents must be kept to substantiate the business transactions.


Subject HeadingBenefits of Record Keeping

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• Better internal control of your business.

• Make better business decisions.

• An essential source of evidence to detect businesslosses, internal fraud and theft.

• Reduce cost and effort required for tax filing.

Under the Income Tax Act, you are required to keep the business records for at least 5 years with effect from 1 Jan 2007.


Subject HeadingTypes of Record to Keep

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Source DocumentsCategory of taxpayers for Record Keeping

Requirements

Record Type Item No Documents RequiredGST-Registered Businesses

Non-GST Registered Businesses

INCOME RECORDS

(Records of each sales transaction)

1Serially numbered receipts issued or cash register tapes or invoices issued

� �

2 Tax invoice/simplified tax invoice issued �

3Rental Agreement signed by both landlord and tenant

� �

4 Books to record goods taken for private usage � �

5 Credit notes for returned goods � �

6 Documents relating to exports � �

7Evidence that payment have been received (e.g. bank statement)

�

BUSINESS EXPENSE RECORDS

(Records of each business expense transaction)

8 Invoice received or Receipt received � �

9Payment made to individuals/companies for services rendered and the relevant contracts/agreements on the provision of services

� �

10 Payment vouchers for staff remuneration � �

11 Employer’s CPF contributions � �

12 Payment evidence (e.g. bank statement) �

PURCHASE RECORDS

(Records of each purchase transaction)

13Tax invoices received, Invoices received or Receipt received

� �

14 Documents relating to imports � �

15 Payment evidence (e.g. bank statement) �

OTHER RECORDS (FOR GST PURPOSES)

16Business goods which were put to non-business use

�

17Disposals of business goods, whether or not for a consideration

�

18Removal of goods from customs-licensed warehouse

�


Subject HeadingTypes of Records to Keep

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ACCOUNTING RECORDS AND SCHEDULESCategory of taxpayers for Record Keeping

Requirements

Record Type Item No Documents RequiredGST-Registered Businesses


ACCOUNTING RECORDS AND SCHEDULES

1 Stock List � �

2 Sales Record Book / Sales Listing � �

3 Purchase Record Book/ Purchase Listing � �

4 General Ledgers � �

5 Balance Sheet, Profit and Loss Statement � �

6GST account summary of input and output tax, including GST refunded to tourists

�

BANK STATEMENT

7Bank statements; with separate bank accounts for personal and business purposes

� � (Recommended)

Record Type Item No Documents RecommendedGST-Registered Businesses


ACCOUNTING RECORDS AND SCHEDULES

1Detailed schedules of Public Transport expenses

� �

2 Detailed schedules of Travelling expenses � �

3 Detailed schedules of Entertainment expenses � �

4 Fixed Asset Schedules � �

5 Records of Capital Allowances � �

Note: The “required records” are mandatory records that businesses must keep for tax purposes. The“recommended records” are records that the businesses are advised to keep as good practices, and theseshould be available, or able to reproduce upon request by the Comptroller of Income Tax and/or GST.


Subject HeadingSimplified Record Keeping

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• Introduced on 1 Jan 2014

• Assist small businesses to make record keeping easier

• Small businesses that qualify will only need to keepbusiness records (e.g. registers, listings) and not sourcedocuments (e.g. receipts and invoices)


Subject HeadingConditions for Simplified Record Keeping

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• Annual revenue < $100,000 for the past 2 financialyears

• Business assets < $100,000 at the end of latestfinancial year

• Must not be an investment holding or propertydevelopment business

• Business is a sole-proprietorship or partnership that isnot GST-registered

www.iras.gov.sg > Businesses > Self-employed / Sole-proprietors /Partners > Learning the Basics > Keeping Proper Records and Accounts> Guides on Record Keeping


Subject HeadingIn Summary

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• Set up good filing system for your paperwork from thestart of your business.

• Make sure records can be understood by anyone.

• Obtain the necessary source documents at time oftransaction.

• Enter transactions accurately & regularly to keeprecords up to date.

• Record business expenses separately from personalexpenses


Subject Headinge-Learning on Record Keeping


Subject HeadingMore Information

21

Visit www.iras.gov.sg > Businesses > Self-employed /Sole-proprietors / Partners > Learning the Basics >Keeping Proper Records and Accounts

To gauge the effectiveness of your record keeping:From the link above, go to “Record Keeping Self-Assessment Toolkit”


Subject Heading

Filing Income Tax Returns

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Subject HeadingTypes of Form

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You will need to report your businessincome in a summarized 2 or 4 linestatement in either Form B or Form P.


Subject HeadingFor a Partnership

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• Precedent partner

� The partner who, among all the partners present in Singapore, isthe first named in the partnership agreement.

� If there is no partnership agreement, the precedent partner is apartner who is agreed upon and appointed by the other partners tobe the precedent partner.

• Obligations of a precedent partner

� To report the business income in Form P.

� Required to inform all the partners of their share of income from thepartnership.


Subject HeadingFor Partners

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• Check with the precedent partner on the share ofincome from partnership.

• Report share of your partnership income/ loss under“Partnership” in the “Trade, Business, Profession orVocation” section of your Form B.


Subject HeadingHow to Report Business Income

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4-Line Statement+

Certified Statement of Accounts

(i.e. Profit & Loss Account and Balance Sheet)

To be signed by the sole-proprietor/ precedent partner certifying that accounts are true and

correct.

Revenue > or = $500,000

Revenue < or = $100,000

2-Line Statement

2nd LineAdjusted Profit/ Loss

1st LineRevenue

Revenue > $100,000 but < $500,000

4-Line Statement

3rd lineAllowable Business

Expenses

1st LineRevenue

2nd LineGross Profit/ Loss

4th LineAdjusted Profit/ Loss


Subject HeadingAllowable Expenses

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Must be incurred during the basis period in the production of

income

Allowed by tax laws

Allowable Expenses

Must be related to your business


Subject HeadingAllowable Expenses

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Examples of Allowable Business Expenses:

Rental paid for business premises

Business entertainment

Advertising, printing & stationery

Upkeep of business

premises & equipments

Employee’s remuneration

Business related overseas travelling expenses

Public transport expenses

Capital allowances on fixed assets


Subject HeadingDisallowable Expenses

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Personal and private in nature

Prohibited by tax laws

Disallowable Expenses

Capital in nature


Subject HeadingDisallowable Expenses

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Examples of Disallowable Expenses:

Maintenance cost for private cars

Personal medical fees, income tax & insurance of sole-proprietor / partner

Repayment of loan taken for business purpose

Food for personal consumption & household

expenses Fines for breach of law

Donations & gifts to non-customers

Salary paid to sole-proprietor/ partner

Entertainment expenses for family & friends

Cost of fixed assets purchased

Personal & Private Expenses Capital Expenses


Subject Heading

Avoiding Common Errors

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Subject HeadingIncorrect Categorisation of Income

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Error Correct Way

Self-employed income incorrectly

reported under “Employment” or

“Other Income”.

To declare 2 or 4-line statement

under “Trade” if you are carrying

on a trade, business, profession

or vocation.


Subject HeadingUnderstatement of Income

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Error Correct Way

Reported net collection (after

deducting purchases / expenses)

as revenue.

Report gross collection as

revenue. Expenses should be

reported separately.


Subject HeadingIncorrect Claim of Expenses

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Errors Correct Way

Claim private and domesticexpenses as business expensese.g. Food for personalconsumptions and medical fees.

Claim only expenses incurred for

your business.

Claim expenses in respect of

private-plated cars (E or S-plate

cars).

These expenses are not

deductible even if incurred for

business purpose.

Claim estimated expenses. Claim expenses based on actual

amount incurred.


Subject HeadingIncorrect Claim of Expenses

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Error Correct Way

Unsubstantiated claims ofpayments to related parties orsuppliers.

E.g. Paying family members whoare hired to help out with thebusiness large amounts of salaryinstead of reasonable amounts ascompared to the salaries of full-time employees.

• Claim expenses incurred foryour business based on actualamounts.

• Amount claimed shouldcommensurate with theactual services performed.


Subject HeadingFailure to Keep Records

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Errors Correct Way

Failing to keep and retainsufficient records for IRAS toascertain income & allowablebusiness expenses.

• To retain business records for5 years. For e.g. invoices,receipts, etc. for the year 2016should be retained for 5 yearstill 31 Dec 2021.

• The Comptroller may requestfor these documents in thecourse of audits.

Misconception that records canbe discarded once a Notice ofAssessment is received.


Subject Heading

Seeking Assistance

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Subject HeadingIf You Need Assistance

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Service Details Contacts

Self help (Record keeping guide) http://www.iras.gov.sg > Businesses > Self-Employed /Sole-Proprietors / Partners > Learning the Basics >Keeping Proper Records and Accounts > Guides onRecord Keeping > Record Keeping Guide for GST/Non-GST registered Businesses

Email • myTax Mail (a secure email system where you are

required to log in using SingPass or IRAS PIN)

https://mytax.iras.gov.sg

• [email protected]

Individual Income Tax 1800-356 8300

Goods & Services Tax 1800-356 8633

Taxpayer Services Centre 1st Storey, Revenue House55 Newton Road, Singapore 307987 (Located opposite Novena MRT Station)

Operating Hours:8am to 5pm (Mon to Fri) 8am to 1pm (Sat)


Subject Heading

Penalties

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Subject HeadingPenalties

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• Penalties may be imposed for the following offences:

� No proper record keeping

� Failure to submit income tax return

� Furnishing an incorrect return

� Tax evasion

• Penalty varies from a fine to imprisonment dependingon the nature and severity of offence


Subject Heading

IRAS’ Voluntary Disclosure Programme

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Subject HeadingVoluntary Disclosure Programme

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IRAS’ Voluntary Disclosure Programme (VDP) encourages taxpayersto come forward voluntarily to correct their errors for reduced penalties.

Timely voluntary disclosuresmade within the 1-year gracefrom statutory filing date

Voluntary disclosures madeafter the 1-year grace period

No penalty imposedReduced penalty of 5% p.a. onincome tax undercharged

www.iras.gov.sg > About Us > Taxes in Singapore > Helping andEncouraging Compliance > IRAS’ Voluntary Disclosure Programme


Subject HeadingVoluntary Disclosure Programme

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Email: [email protected]

How to Inform IRAS

Tel : 6351 3121 / 6351 3122



Thank You

The information presented in the slides aims to provide a better general understanding of taxpayers’ tax obligations and is not intended to comprehensively address all possible tax issues that may arise. This information is correct as at 30/09/2017. While every effort has been made to ensure that this information is consistent with existing law and practice, should there be any changes, IRAS reserves the right to vary its position accordingly.

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Tax Obligations of Self-Employed Persons - IRAS€¦ · • Obligations as a Self-Employed Person...

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