Overview
"The only certainties in life are death and taxes." This renowned statement, credited to Benjamin Franklin in 1789, still holds true today. Across nearly every country globally, tax reporting obligations are mandated by domestic tax legislation. These laws aim to compel eligible individuals to contribute taxes to their respective countries by reporting income and paying taxes promptly to the government. Tax revenue serves multiple purposes. It not only funds operational expenses but also aids in redistributing wealth to disadvantaged groups, thereby addressing social inequality. A significant portion of tax revenue is often allocated to drive development projects, serving as economic engines for sustainable long-term domestic growth.
Various forms of taxes have been devised to aid governments in achieving their tax collection targets, including income tax, capital gains tax, customs duties, value-added tax, sales tax, service tax and stamp duty. This article focuses on income tax obligations.
Under the Self-Assessment System (SAS), tax returns filed by taxpayers are deemed as final tax assessments by the Inland Revenue Board (IRB). The SAS has largely shifted the responsibilities of tax computation from the IRB to the taxpayers. Taxpayers are expected to understand the tax requirements and fulfil their tax obligations. In other words, taxpayers must ensure that all receipts that are subject to tax are included as income for tax purposes, and only expenses that are tax deductible are claimed against such income, in reporting their net income (i.e. chargeable income) to the IRB. Understanding the key deadlines and requirements for tax filing can help taxpayers plan ahead, organize their finances, and meet their obligations in a timely manner.
It is essential to be well-informed about the various tax filing deadlines and the potential penalties that may apply if deadlines are missed. In an effort to promote electronic filing (e-filing), taxpayers who opt for e-filing can enjoy extended filing deadlines, provided that the e-filing system is available. These extensions typically range from 15 days to 2 months beyond the statutory deadline outlined in the Income Tax Act (ITA). Timely adherence to tax filing deadlines is crucial for all taxpayers, including individuals, companies, and trusts. Failure to meet these deadlines can result in significant penalties, including late filing penalties, late payment penalties, and compound fines for non-filing, the severity of which varies depending on the taxpayer's liability.
To assist you in meeting your tax compliance obligations for the year of assessment 2023, we have compiled the following information to provide readers with an overview, including:
- Type of tax returns prescribed by the IRB
- Statutory tax filing deadlines under the ITA
- Extended filing deadlines i.e. grace period given by the IRB
- Potential penalties for various tax offences, i.e. non-filing, late filing and late payment.
Please click here to read the full details on Tax Compliance for 2023.
Record Keeping
After the tax submission, the IRB retains the authority, on a selective and discretionary basis, to request supporting documentation regarding the chargeable income reported by taxpayers. This occurs during a tax audit aimed at scrutinizing and confirming the accuracy of the taxes paid. The responsibilities of taxpayers include retaining all pertinent accounting and supporting documents necessary for the preparation of accurate accounts, whether audited or unaudited, and income tax returns.
Additionally, maintaining proper records helps taxpayers expedite the auditing process for any business entities where audited accounts are mandatory, thereby avoiding delays in the submission of accounts and income tax returns within the stipulated deadline. Accounting software can assist taxpayers in tracking records and providing analysis features to ease the compilation of information for audit and tax purposes.
