Income Tax Matter: Awareness Helps You Avoid Penalties
Being aware of income tax matter is important because the Inland Revenue Authority of Singapore (IRAS) imposes heavy penalties on people who do not comply or pay their correct tax obligations. More than monetary fines, individuals who do not satisfy the internal revenue system’s requirements can be arrested, prevented from leaving the city state or, worse, put behind bars.
The most common issues regarding income tax matter in Singapore center on individual employment taxes. Here are two of them:
Individuals Required To Pay Income Tax In Singapore
Generally speaking, Singapore imposes income tax on all gains or profits earned through employment. Such gains include salaries, wages, commissions, bonuses, gratuities, monetary or non-monetary allowances, and all other benefits resulting from employment. The state uses territorial basis for its income tax rules. Meaning, a person is taxed on income and other employment benefits earned within its boundaries. For income earned from outside sources, tax shall be levied once the income is remitted or transferred to Singapore and the employee-taxpayer is a resident of the city-state.
If a person works for a foreign company headquartered outside Singapore and whose employment income is paid outside the state, such individual will be taxed on the income that has been derived within the work duration done in Singapore. The exception to this rule would be a non-tax resident employee who worked in the city state for not more than 60 days in the year immediately preceding the assessment period. On the other hand, if a person performs services outside Singapore, but his employment is categorically and substantially established within the state, then such individual will be fully taxable in Singapore. Moreover, compensation paid to directors and public entertainers does not enjoy the 60-day exception rule.
How To Avoid Tax Penalties In Singapore
IRAS continually works to ensure a fair and equitable taxation system. However, on the part of the employee-taxpayer, insufficient knowledge of the tax laws may result to penalties. Singapore is known for dealing a tough hand on individuals who don’t abide by its laws. Improper filing of tax returns, errors in accounting statements, or miscalculations on taxes payable to the government will be dealt with accordingly. Under-declaration of your taxes owed to IRAS is a serious offense.
As an employee, you can check — under the auto-inclusion scheme — if your employer is transmitting your pertinent income tax documentation to the revenue authority. Otherwise, the smartest way to avoid tax penalties is to get help from a professional tax and accounting firm. They have certified accountants who can compute your payable taxes accurately. With experts on your side, you save time while gaining peace of mind. This is especially advantageous for self-employed individuals. By employing an accounting firm, you don’t need to learn the nitty-gritty of the unique rules imposed on self-employed income covered by the Trade, Business, Profession or Vocation section of the tax laws.