If IRAS asks about a bank credit you describe as director funding or capital, provide the records showing what the transaction actually was. A bank statement proves money arrived, but may not establish its purpose or tax treatment. Match the transfer to its source, contemporaneous documents, approvals and accounting entries before preparing a response.
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Separate the possible explanations
A customer payment, borrowing, share subscription, reimbursement and transfer between the company’s own accounts can all appear as a bank credit. They should not be treated alike because a description happens to say “funds” or “director”. List the evidence supporting the explanation for the particular amount.
IRAS requires companies to retain source documents and accounting records that explain business transactions. Its corporate record keeping guidance sets a general minimum retention period of five years from the relevant Year of Assessment. Keep the underlying transaction trail, not just a year-end balance.
If the amount is said to be a director loan
Gather the transfer evidence, the identity of the lender, any loan agreement and the records of the company’s acceptance of the funding. Explain the repayment terms, interest position and outstanding balance. If there was no formal agreement at the time, explain that honestly and obtain advice on documenting the current position without fabricating an earlier document.
A schedule should reconcile the opening balance, advances, repayments and closing balance. Check whether the same payment was also recorded as sales or share capital. An unexplained duplicate entry is a bookkeeping problem that needs resolution before a tax response is finalised.
If the amount is said to be a capital injection
Bring the relevant subscription, allotment and company records, together with proof of payment and the share capital ledger. Identify whether shares were actually issued, whether money was received pending a proposed issue, and what approvals or filings were made. Do not simply relabel a loan “capital” to answer a query.
The corporate secretarial and accounting records should tell the same story. Ask the secretary and accountant to reconcile any discrepancy before making a statement about the completed transaction.
Prepare a concise response pack
- The IRAS query, stated response date and the exact transaction requested.
- A one-page factual explanation with the amount, date, payer and purpose.
- The bank evidence and matching source documents.
- The relevant loan or share documentation and approvals.
- A ledger extract and reconciliation explaining any corrections.
Answer the question asked and index the attachments. Distinguish what the documents establish from what remains uncertain. If more time or clarification is needed, contact IRAS appropriately; do not assume that preparing a response suspends a deadline.
A practical example
Illustration: A company’s bank receives funds from its director, but the receipt is coded to sales. The company retrieves the funding correspondence and repayment record. Its accountant checks and documents the incorrect coding, reconciles the director balance and helps explain the correction. The response presents the evidence rather than asking IRAS to accept the bank narration alone.
When is specialist help useful?
Seek assistance where the documents conflict, funding came through several people or entities, interest or overseas parties are involved, or IRAS is questioning more than one period. Tax advice can assess the implications while the accountant and corporate secretary reconstruct a reliable factual trail.
Related guides
- How to Respond to an IRAS Query or Review Letter Professionally
- Understanding Directors’ Loans: Tax, Accounting and Compliance Treatment
- Accounting Treatment of Share Capital, Share Premium and Reserves in Singapore
Official sources
How Raffles Corporate Services can help
If you would like assistance with tax advice or help with your company's records, email [email protected] or WhatsApp +65 8501 7133. We can coordinate relevant corporate services, tax advice and, where needed, legal assistance from advisers at associated law firms. Legal advice and representation are provided by those advisers. This article is general information and does not replace advice on your circumstances.