Navigating corporate tax compliance in Singapore is essential for any business operating in the city-state. While its tax system is well-regarded for its simplicity and competitiveness, failing to meet corporate tax obligations can result in severe penalties.
From late filing to underreporting income, businesses that fall short of the Inland Revenue Authority of Singapore (IRAS) requirements face fines, interest charges, and even legal action. In this blog, we explore the various corporate tax penalties in Singapore, how to avoid them, and the importance of staying compliant to protect your business.
Related Read: How to File Corporate Tax in Singapore
Why is it Important to Pay Corporate Tax in Singapore?
Companies in Singapore must file corporate tax on time and accurately. The corporate tax comprise of these two components:
- Estimated Chargeable Income (ECI)
- Form C-S/C-S (Lite)/Form C
It is important that they do so for several reasons:
Achieve Statutory Compliance
Corporate tax is a legal obligation under Singapore’s Income Tax Act. Companies that do not fulfill their tax responsibilities can face penalties, fines, and legal consequences, which can tarnish their reputation.
Related Read: Corporate Tax Singapore: What Tax Submission Deadline Should You Know?
Avoidance of Penalties
Failure to pay corporate taxes or filing inaccurately can result in hefty penalties, interest charges, and audits by IRAS, which can disrupt business operations and cash flow.
Business Credibility
Making payment on time signals financial responsibility and transparency. This enhances the company’s reputation with stakeholders, such as investors, customers, suppliers, and financial institutions. A credible company is more likely to attract investment, secure financing, and establish strong business partnerships.
Penalties for Late Filing or Non-Filing of Corporate Income Tax Returns for Form C-S/C-S (Lite)/C
Companies that file their corporate income tax returns late after the 30 November deadline or do not file them will be imposed with a composition amount or face recovery actions.
It is an offence for companies to fail to file their corporate tax returns together with financial statements and tax computation. If companies fail to file by the due date, IRAS may implement these recovery actions:
- Offer to compound the offence
- Issue an estimated Notice of Assessment (NOA), where the estimated tax must be paid within 1 month
- Issue a Section 65B(3) notice to your company director to submit the required information in the Corporate Income Tax Returns to IRAS
- Issue a Notice to Attend Court or Summons to the company or individuals responsible for the company’s operations, including the directors, to Court
Estimated NOA
IRAS may issue an estimated NOA based on the offending company’s income for the past years or information that they may possess. They can also make assumptions to estimate income increases.
Offer of Composition
IRAS may allow the company to pay a composition amount instead of taking actions to prosecute. The amount, not exceeding S$5,000 per offence, may be offered depending on the company’s past compliance records. A notice informing the composition amount will be sent. The amount must be paid and the overdue tax return must be filed by the due date to avoid prosecution.
Appealing for a Waiver of the Composition Amount
Companies can appeal online via IRAS’ Appeal Penalty Waiver on the myTax Portal. They must have these details to complete the appeal request:
- Year of Assessment
- Designation
- Email Address
- Contact Number
Appeals will only be considered if these two requirements are met:
- The outstanding tax returns and/or documents have been submitted before the due date mentioned in the offer of composition
- The company has filed the tax return timely for the past 2 years
Notice to Attend Court or Summons
This may be issued to the company or the company directors to attend Court on a specific date if IRAS does not receive:
- The mandatory tax return and/or documents by the deadline
- Payment of the composition amount by the due date
Companies that do not wish to attend Court must perform these actions at least 1 week before the date specified in the Summons:
- File the outstanding tax return and/or documents
- Pay the composition amount
Failure to Attend Court
Companies that fail to attend court can expect further legal action to be taken against them, such as issuing a warrant of arrest for the company director. If convicted in Court, the company may receive a fine of not more than S$5,000 per offence. If the company director is convicted for failing to comply with Section 65B(3), he could receive a fine of up to S$10,000 or imprisonment of up to 12 months or both for each offence.
Late Payment or Failure to Pay Corporate Tax
Companies are expected to pay within 1 month from the Notice of Assessment (NOA) date. IRAS may impose these actions if a company fails to do so by the due date:
- Demand late payment penalties
- Take legal action
- Designate agents such as your company’s bank, tenant or lawyer managing the sale of any of your property to recover the overdue tax
The list is not exhaustive, which means that IRAS may perform actions outside of those mentioned above as it deems necessary.
Related Read: 5 Reasons to Outsource Your Corporate Tax Filing in Singapore
Late Payment Penalty
IRAS will impose a 5% late payment penalty on the unpaid tax if full payment is not received by the due date of the NOA.
If an objection has been filed and the outcome is still pending, the company must still pay the tax assessed as shown in the NOA. Any excess payment will be refunded to the company if the assessment is amended.
If the tax remains unpaid 60 days after the 5% late payment penalty is imposed, an added penalty of 1% per month may be imposed for every completed month that the tax is unpaid, up to a maximum of 12% of the unpaid tax.
Appealing for a Waiver of the Late Payment Penalty
Companies can appeal online through the Appeal Penalty Waiver service at the IRAS myTax Portal. These details must be prepared to appeal:
- Year of Assessment
- Designation
- Contact Number
- Email Address
Appeals will only be considered if these two conditions are fulfilled:
- The overdue tax is paid fully by the due date stated in the penalty notice and is reflected in the tax account
- No waiver has been granted in the past 2 calendar years up to date
Appointing Agents
If the tax is still unpaid, IRAS may designate agents such as your company’s bank, lawyer, tenant, or other 3rd parties with money due to recover the taxes owed. When this happens, the company will experience inconvenience when using their bank accounts until the corporate income tax is fully paid for.
Penalties for Errors in Tax Returns
In addition to the penalties above, IRAS also audits tax returns and imposes penalties for errors, discrepancies, and omissions. Taxpayers face consequences depending on the presence of evidence that indicate the intention to evade taxes.
Without Intention to Evade Taxes | With Intention to Evade Taxes |
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Voluntary Disclosure of Corporate Income Tax Errors
IRAS knows that taxpayers can sometimes make errors in their tax returns because of an absence of care or knowledge of their tax obligations. The IRAS Voluntary Disclosure Programme (VDP) encourages taxpayers who have made errors to come forward voluntarily and timely to correct their mistakes and displays their willingness to reduce penalties for voluntary disclosures meeting the qualifying conditions.
The VDP applies to:
- Income tax
- Goods and Services Tax (GST)
- Withholding tax
- Stamp duty
Voluntary Disclosure | Penalty |
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Made within the 1 year grace period from the statutory filing deadline with the qualifying conditions achieved | No penalty |
Made after the 1 year grace period from the statutory filing deadline while achieving the qualifying conditions | Reduced penalty of 5% of the income tax undercharged or of the amount of cash payout/bonus exceeding the entitlement obtained, per year (after the grace period) that the error was late in being rectified |
Voluntary Compliance Initiatives
Companies can enjoy benefits such as a prolonged grace period or penalty waivers when they voluntarily disclose errors by adopting these initiatives:
- Tax Governance Framework (TGF): A one-time extended grace period of 2 years for errors voluntarily disclosed by the business within 2 years from IRAS’ approval date of the company’s TGF application
- Tax Risk Management and Control Framework for Corporate Income Tax (CTRM): A one-time waiver of penalties for voluntary disclosure of previous years’ errors for businesses with the CTRM status
How to Make a Voluntary Disclosure
Companies must perform these steps to make a successful voluntary disclosure application:
- Make the disclosure on the Revise/Object to Assessment e-service on IRAS’ myTax Portal where they will receive an instant acknowledgement. They may also receive the revised NOA earlier
- Email the necessary information and supporting documents to ctmail@iras.gov.sg
Ensure Complete Corporate Tax Compliance With InCorp
We aim to be your partner in navigating the complexities of tax compliance, ensuring that your business meets its obligations and benefits from an informed and strategic approach to tax governance and voluntary disclosure.
With our expertise, we can handle every part of the process, such as preparing and submitting all necessary documentation. Let InCorp take the helm in managing your tax affairs, so you can focus on driving your business forward with confidence and peace of mind. Contact us today to start!
FAQs about Corporate Tax Penalties
- A 5% late payment penalty will be imposed on the unpaid tax if full payment is not received by the deadline of the NOA.
- The penalty for late payment of the ECI is the same as for Form C-S/C-S (Lite)/Form C.
- The penalty depends on whether there is evidence to prove that there was an intention to evade taxes. If there is evidence, there may be a penalty of up to 400% of the amount of undercharged tax, a fine of up to S$50,000, or a prison term of up to 5 years.