Few letters unsettle a business owner as quickly as one from the Inland Revenue Authority of Singapore (IRAS) asking for supporting documents. The good news is that most reviews do not come out of nowhere. They tend to follow patterns in how returns are prepared, filed and supported. This article on avoiding common triggers for IRAS audits and reviews sets out what typically draws attention, why it does so, and how a company can keep its records in good order.
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Understanding these triggers is not about hiding anything from the tax authority. It is about making sure that every figure your company reports can be explained, supported and reconciled. Avoiding common triggers for IRAS audits and reviews begins with good habits throughout the year, not a scramble when a query letter arrives.
Who this applies to
This guidance is relevant to any Singapore-incorporated company that files Estimated Chargeable Income (ECI), Form C-S or Form C with IRAS, and to any business registered for GST. It also applies to sole proprietors and partnerships that file individual or partnership tax returns, although the specific forms differ.
- Directors and business owners who sign off on tax returns, even when an accountant prepares them.
- Finance managers and bookkeepers responsible for the ledgers behind the returns.
- GST-registered businesses that submit quarterly returns through the IRAS myTax Portal.
- Start-ups and SMEs claiming tax incentives, exemptions or deductions for the first time.
Dormant companies are not exempt from filing obligations, so the same discipline on deadlines and accuracy applies to them as well.
Key rules and requirements in Singapore
IRAS operates on a self-assessment basis. The company declares its income and claims its deductions, and IRAS may later check whether those declarations are supported. There is no single “audit list” that a company can avoid. IRAS uses a mix of risk assessment, data analytics and information received from third parties to decide whom to review, so the points below are common patterns rather than guarantees.
Filing on time and consistently
Late or missing returns are among the most visible signals. A company must file its ECI within three months of its Financial Year End (unless it qualifies for the waiver), and its Form C-S or Form C by the annual deadline. GST returns are due within one month after each accounting period ends. A pattern of late filing, or of corrections filed repeatedly, tends to attract closer attention.
Figures that do not reconcile
IRAS can compare information across several sources: the income tax return, GST returns, employer filings for CPF and employment income, and the financial statements lodged with ACRA. If revenue reported for GST differs sharply from revenue in the income tax return, with no clear explanation, a query is likely.
Unusual movements and deductions
Large swings in revenue, gross margin or expenses from one year to the next are not wrong in themselves, but they invite questions. The same is true of deductions that look private or capital in nature, such as personal travel, family expenses or asset purchases booked as repairs. Under the Income Tax Act, an expense is generally deductible only if it is incurred wholly and exclusively in the production of income.
GST claims
Input tax claims need proper tax invoices and must relate to business use. Large or repeated GST refunds, claims on blocked items such as club subscriptions or motor car expenses, and zero-rating of supplies without export evidence all carry risk.
Record-keeping
Companies are generally expected to keep accounting records and supporting documents for at least five years. The Companies Act also requires proper accounting records that explain the company’s transactions. Where records cannot be produced, IRAS may disallow claims or make its own assessment.
Step-by-step process
A practical routine reduces the chance of a review and, if one does arrive, makes the response far less stressful.
- Keep the books current. Reconcile bank accounts and update the ledgers monthly or quarterly, not once a year.
- Retain source documents. Store invoices, contracts, bank statements and payroll records in an organised way for at least five years.
- Review before filing. Compare this year’s figures with last year’s, and note the reason for any large movement in a short file memo.
- Cross-check filings. Make sure revenue in GST returns, the income tax return and the financial statements can be reconciled.
- Test deductions. Ask of every large expense whether it is business-related, correctly categorised and supported by a document.
- File on time. Diarise ECI, Form C-S or Form C, GST and employer filing dates in the IRAS myTax Portal calendar.
- Correct errors early. If you discover a mistake, consider a voluntary disclosure to IRAS, which may attract lower penalties than errors found on review.
Common mistakes to avoid
- Mixing personal and company spending, then claiming all of it as a business expense.
- Recording director loans informally, without agreements or a clear repayment trail.
- Claiming GST on invoices that are not addressed to the company or lack the required details.
- Estimating ECI carelessly, then filing a Form C-S that departs significantly from it.
- Throwing away documents after the financial statements are signed.
- Leaving unusual related-party transactions undocumented, including transfer of assets or management fees at unexplained prices.
- Ignoring an IRAS letter in the hope that it will go away.
Practical examples
Consider a small trading company whose revenue doubled in a year. Its Form C-S shows a gross margin that fell from 40 per cent to 22 per cent, while its GST returns show revenue well above what the accounts report. Each of these points has an ordinary explanation, perhaps a new low-margin product line and a timing difference in revenue recognition. Without a reconciliation and a short written note, however, the company would struggle to answer quickly if IRAS asked.
A second example is a services company that claims SGD 18,000 in “staff welfare” expenses. On review, SGD 12,000 turns out to be a family holiday paid for by the director. The deduction is disallowed, the tax is adjusted and penalties may apply. Had the director repaid the company or recorded the item as a loan, the problem would not have arisen.
A third example involves a GST-registered business that files its returns late for three quarters in a row. Even if every figure is correct, the pattern of late filing may lead IRAS to look more closely at the company’s other compliance records.
How a corporate secretary can help
A corporate secretary in Singapore is typically the person who keeps the company’s filing calendar, statutory registers and ACRA obligations in order. That role overlaps naturally with tax compliance, because many IRAS problems start with missed dates or incomplete records. Raffles Corporate Services can support your company with annual filings through the ACRA BizFile+ portal, bookkeeping and accounting, ECI and corporate tax computations, GST filing and payroll support, so that the figures reported to each authority stay consistent.
If you do receive a query or review letter, we can help you understand what is being asked, gather the supporting documents and prepare a measured, accurate reply. This article is general in nature, and every company’s position is different, so tailored advice is always worth seeking.
Frequently Asked Questions
Does an IRAS query mean my company is being audited?
Not necessarily. IRAS often sends a query or review letter to clarify a particular item on a return. A full audit is more extensive, but both require a prompt and accurate response.
How long should I keep my accounting records?
Companies are generally expected to retain accounting records and supporting documents for at least five years. Some documents, such as those for long-term assets, may be worth keeping for longer.
What should I do if I find an error in a return I have already filed?
Correct it as soon as possible. IRAS has a voluntary disclosure framework under which penalties may be reduced where a taxpayer comes forward before IRAS raises the matter. Speak to a professional adviser on how it applies to your case.
Can I avoid a review by filing a nil or very low-profit return?
No. Reporting figures that do not reflect the company’s actual activity can raise more questions, not fewer. Accurate reporting supported by records is the safest approach.
Who is responsible if my accountant makes a mistake?
The company and its directors remain responsible for the accuracy of what is filed. It is therefore sensible to review the returns before they are submitted.
Key takeaways
- Most IRAS reviews follow identifiable patterns, such as late filing, inconsistent figures, unusual deductions and weak GST support.
- Reconcile revenue across the income tax return, GST returns and financial statements before filing.
- Keep source documents for at least five years and store them in an organised way.
- Explain large year-on-year movements in a short written note kept on file.
- Keep personal and company expenses separate, and document director and related-party transactions.
- Correct errors early and respond to IRAS letters promptly.
Requirements may change, so always check the latest guidance from ACRA, IRAS or MOM, or consult a professional adviser.
If you would like to find out more about how Raffles Corporate Services can assist with your company’s compliance and corporate secretarial requirements, please get in touch with the team at [email protected].
Yours sincerely,
The editorial team at Raffles Corporate Services
Disclaimer: This does not constitute legal advice. If you require legal advice, please contact a lawyer.