Singapore Companies Tax and Filings update – No room for delay with your corporate filings
We have prepared this comprehensive guide to corporate filing requirements in Singapore as it is evident that there is increased scrutiny on late filings from both IRAS and ACRA. With the prospect of Directors being called to court, action should be taken immediately to ensure your company affairs are in order.
There are a number of annual statutory obligations under Singapore’s Companies Act and Income Tax Act – preparing financial statements, holding annual general meetings, filing annual returns and filing income tax returns – that company directors must comply with or face enforcement action.
Each offence carries a financial penalty of up to SGD5,000 and filing breaches can lead to the disqualification of directors and/or companies being struck off the register.
The industry has seen a dramatic increase in the number of regulatory interventions, enforcement actions and fines being undertaken or imposed by both the Accounting & Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS) in recent months. As a financial hub, Singapore aims for more transparency to ensure global trust is maintained.
Failure to comply with this regulatory framework brings risks for firms: reputationally, operationally and financially. Companies operating in Singapore need to ensure that their governance, systems and controls are capable of meeting these obligations in a timely manner. Alternatively, they can engage the services of a registered agent such as Sovereign to perform this work on behalf of their company and ensure that compliance is maintained.
Annual General Meeting (AGM) and Annual Return (AR)
A director of a company incorporated under the Companies Act, Cap 50 is required to comply with the following statutory obligations:
- Section 175 of the Act requires a company to hold an AGM, unless exempted. Listed companies are required to hold the AGM within four months after the Financial Year End (FYE). Unlisted companies are to hold the AGM within six months after FYE.
- Section 197 of the Act requires a listed company to file an AR within five months after FYE and an unlisted company within seven months after FYE. For companies having a share capital and keeping a branch register outside Singapore, listed companies must file an AR within six months after FYE and unlisted companies within eight months.
AGMs ensure that the stakeholders of a company are kept updated about the company’s financial position and direction. It also provides a platform for stakeholders and company officers to communicate with each other at least once a year.
The AR provides critical information that helps the company’s stakeholders to make informed decisions. The AR is an electronic form lodged with ACRA that contains important particulars of the company such as the name of the directors, its members, and the date to which the financial statements of the company have been made.
Annual General Meeting (AGM) Requirements
The financial statements presented at an AGM for listed companies must be made up to a date not more than four months before the AGM, while for non-listed companies, they must be made up to a date not more than six months before the AGM.
The date of your company’s AGM is declared to ACRA when filing your company’s Annual Return. If your company is exempted from holding an AGM or has dispensed with the holding of AGM, you are still required to submit the details when filing your company’s Annual Return.
Private companies can be exempted from holding AGMs if all the members pass a resolution to dispense with holding an AGM and the financial statements are sent to their members within five months of the financial year end. The exemption is subject to the following safeguards:
- A member who wishes to request that an AGM be held must notify the company no later than 14 days before the end of the sixth month after the financial year end.
- Directors must hold an AGM within six months after the financial year end if notified by any member of the company to do so. A company can seek the Registrar’s approval for an extension of time to hold an AGM but must do so before the six-month deadline expires.
- Private companies must hold a general meeting to lay financial statements if any member or auditor requests for it no later than 14 days after the financial statements are sent out.
Private dormant companies, which are not listed (or not a subsidiary of a listed company) and have total assets less than or equal to SGD500,000, are exempt from preparing financial statements and do not need to hold AGMs, subject to the safeguards above.
Penalties for not holding an AGM
Directors who fail to follow the AGM requirements can be prosecuted in Court and may also face disqualification or debarment from being a director. ACRA can also impose composition (settlement) fines on companies that do not hold the required AGMs.
Separately, a late lodgement penalty of up to SGD600 will be imposed for each AR that is lodged late
Annual Return (AR) Requirements
Under the Companies Act, all Singapore-incorporated companies, including inactive and dormant companies, are required to file annual returns with ACRA to ensure that the company’s information on ACRA’s register is up to date. Filing your company’s AR on time helps to ensure proper and timely disclosure to all stakeholders.
Below is a list of information that you are required to provide when filing the AR.
- Company details – Ensure the company type, registered office address, particulars of the company officers and details of any registered charges are up to date. If the information has changed or is incorrect, you must update the details. You will also need to confirm whether there are any changes to your company’s primary and secondary business activities.
- Company type and status – Active or Dormant, Solvent or Insolvent, Exemption if any, Qualified opinion of Auditor if any.
- Shares ¬ Verify your company’s shares details, such as the number of shares held, issued share capital, and amount of paid-up share capital.
- Financial Statements – If a company is required to file a full set of financial statements in XBRL format, these must be prepared and validated before you can file the AR. Companies that are not required to file financial statements must instead submit an online declaration, when filing their AR.
- Date of Annual General Meeting (if applicable) – Indicating the date of your company’s annual general meeting (AGM), if it was held.
- Address where your company’s Register of Registrable Controllers (RORC) is maintained and the Register of Nominee Directors is kept.
ARs must be filed within five months after FYE for listed companies or seven months for non-listed companies.
For companies having a share capital and keeping a branch register outside Singapore, ARs must be filed within six months after FYE for listed companies or eight months for non-listed companies.
The AR can be filed only after an AGM has been held or, if a company is not required to hold an AGM, after financial statements have been sent. For a private dormant relevant company that is exempted from preparing financial statements or that has dispensed with the AGM, the AR can be filed only after FYE.
Enforcement action for AR filing breaches
All companies are required to file ARs on time. Companies that file ARs after the due date will be imposed with a late lodgement penalty of up to SGD600 for each late filing. ACRA may further prosecute the company and/or its directors that breach statutory obligations in Court if:
- The company and/or its directors do not accept ACRA’s offer of settlement (‘composition’); or
- ACRA decides not to offer settlement for the breaches.
ACRA will serve the summons to the company’s registered office address and/or the director’s residential address by registered post. The summons will state the date, time, and the Court where the company’s representative or director is required to appear. ACRA cannot offer settlement after a summons is issued.
In Court, the company’s representative or director can decide whether to plead guilty or seek an adjournment. An adjournment will give the director additional time to file the pending submissions. If the director and/or the company are convicted by the Court, they can be fined up to a maximum of SGD5,000 per charge, with the charges remaining permanently on record. For a director this will mean a criminal record that cannot be expunged.
If the company fails to send a representative (with a letter of authority) to attend Court, the Court may proceed to fix the matter for an ex parte hearing to decide whether the company is guilty of the charges. If the director fails to attend Court, a warrant for his / her arrest will be issued by the Court.
A director who is convicted of three or more filing related offences under the Companies Act within a period of five years will be disqualified as a director, under S155 of the Companies Act. Once disqualified, an individual is not permitted to be a company director or take part in the management of any local or foreign company for five years.
Striking off companies that failed to file ARs
ACRA can strike off a company for failing to file an AR. A director with at least three companies struck off by ACRA within a period of five years can be disqualified by ACRA. Once disqualified, an individual is not permitted to be a company director or take part in the management of any local or foreign company for five years, effective from the date on which the third company is struck off.
Corporate Income Tax Return (CITR)
Singapore-incorporated companies are required to declare their actual income to IRAS on an annual basis via a CITR.
An overview of the types of CITR is as follows:
- Form C-S – Singapore-incorporated companies with annual revenue of SGD5 million or below.
- Form C-S (Lite) – Singapore-incorporated companies with annual revenue of SGD200,000 or below.
- Form C – All other companies.
In addition to the annual revenue criteria, companies submitting Form C-S or Form C-S (Lite) can only derive income taxable at the prevailing Corporate Income Tax rate of 17% and must not be claiming any of the following in the Year of Assessment (YA):
- Carry-back of Current Year Capital Allowances/ Losses
- Group Relief
- Investment Allowance
- Foreign Tax Credit and Tax Deducted at Source
You must ensure that the return is completed correctly and gives a full and true account of the company’s income. Before completing its CITR, a company should prepare its tax computation, which is a statement showing the tax adjustments to the accounting profit to arrive at the income that is chargeable to tax. Tax adjustments include non-deductible expenses, non-taxable receipts, further deductions and capital allowances.
A company filing Form C must file audited / unaudited financial statements, tax computation and supporting schedules at the same time. A company filing Form C-S/ Form C-S (Lite) is not required to file its financial statements, tax computation and supporting schedules, but these documents should be ready for submission if IRAS requests.
A dormant company is still required to e-File a Form for Dormant Company unless it has been granted an exemption from CITR submission.
Penalties for errors in CITRs
The IRAS will audit tax returns and impose penalties if there are errors, omissions or discrepancies. Under the Income Tax Act 1947, taxpayers can face the following consequences depending on whether there is evidence indicating intention to evade taxes:
- No intention to evade taxeso Penalty of up to 200% of the amount of tax undercharged
- Fine of up to SGD5,000; and/or
- Imprisonment of up to three years
- Intention to evade taxes
- Penalty of up to 400% of the amount of tax undercharged.
- Fine of up to SGD50,000.
- Imprisonment of up to five years
Where there is no evidence of an intention to evade taxes, IRAS will decide on the penalties for errors in tax returns by considering if taxpayers have been compliant with their tax responsibilities, or if they have committed errors with negligence and/or without reasonable excuse.
Failure to file
The filing due date is 30 November each year. Failure to file the relevant CITR by the due date is an offence and IRAS can take the following enforcement actions:
- Issue an estimated Notice of Assessment based on a company’s previous annual income or any other information that IRAS may have. If a company receives an estimated Notice of Assessment, it is required to pay the estimated tax within one month of the notice date or file an objection to the assessment within two months of the notice date. It should pay the estimated tax even if it intends to object to the assessment or is awaiting the outcome of the objection. There will be penalties for late payment. When filing an objection, a company must submit the relevant CITR, financial statements and tax computation. If all the documents are submitted, IRAS will review the estimated tax assessment and refund any excess tax paid.
- Offer to allow company to avoid prosecution by paying a settlement amount not exceeding SGD5,000, depending on a company’s past compliance record. A company must pay the composition amount and file the overdue tax return and documents by the due date to avoid prosecution. IRAS may still take legal action against a company if it fails to file the outstanding tax return after paying the settlement amount. The payment made will be used to settle any unpaid tax.
- Issue a Section 65B(3) notice to a company director to submit the required information in the CITR to IRAS by the due date stated in the notice, to avoid being summoned to Court.
- Issue a summons to the company or persons responsible for running of the company (including the directors) to appear in Court. To avoid attending Court, a company must file the outstanding tax return and/or document and/or pay the settlement amount at least one week before the Court date. To appeal for a postponement, a company’s representative, even if he / she is the director, must attend Court on the Court date with a Letter of Authorisation.
If a company fails to file a CITR for two years or more, it may be issued with a summons to attend Court. If convicted in Court, a company may be ordered to pay a penalty that is twice the amount of tax assessed and a fine not exceeding SGD5,000.
Failure to attend Court will result in further legal action being taken against a company. A warrant of arrest may also be issued against a company director.
In Court, if convicted of the offence, a company may face a fine not exceeding SGD5,000. If a company director is convicted for failure to comply to Section 65B(3), he / she could face a fine of up to SGD10,000 or imprisonment of up to 12 months or both.
Any outstanding tax returns and/or documents still must be filed, or further legal action may be taken.
Sovereign has a strong team of experienced industry professionals in Singapore to help meet all your Corporate Secretarial and Accountancy requirements. We support the move to enforce timely filing because this will further enhance the excellent reputation that Singapore has earned as a leading international financial centre.