Income Tax – Revised e-Tax Guide on Expenses Incurred on Renovation or Refurbishment Works


On 25 Jan 2018, IRAS reissued its e-Tax Guide on “Tax Deduction for Expenses Incurred on Renovation or Refurbishment Works Done to Business Premises” pursuant to Section 14Q of the Income Tax Act (“the ITA“)

Take note the following amendments to the e-Tax Guide previously issued on 6 June 2013 have been made:

  1.   It is clarified that expenditure incurred in respect of any work carried out to a place of residence provided to or to be provided to employees does not qualify for a tax deduction under Section 14Q of the ITA.
  2. Paragraph 8.4 has been amended to include additional qualifying items allowable as a deduction under Section 14Q.

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Singapore GST – Company Director Convicted for Unlawful GST Collection


It was reported in IRAS’ website on 19 Jan 2018 that Kumarselvam S/O Veejay Koumar, who was a director of MV Global Trading Pte Ltd, flouted the law when his company unlawfully charged GST on a total of 102 sales invoices issued to its customers.

IRAS’ investigations revealed that MV was not GST-registered and Kumarselvam knew that this is the case.  The offenses were detected only because of IRAS’ efforts in conducting checks on businesses before allowing any business to register for GST. Investigations further revealed that Kumarselvam was the person in charge of managing and overseeing MV’s operations at the relevant time.  He had personally prepared and issued 3 of the 34 sales invoices and instructed his staff to prepare and issue the other sales invoices to customers, which charged the prevailing rate of GST on these sales. The “GST” amount was reflected on the said invoices issued.

As MV was not GST-registered, it did not file any GST returns or account for the “GST” collected from MV’s customers to the Comptroller of GST.

In the end, Kumarsalvam pleaded guilty to the 34 charges proceeded on. For being a director when MV unlawfully charged $3,791.21 as GST, the court sentenced Kumarselvam to a penalty of $11,373.63, which is 3X the amount shown as tax, and a fine totaling $51,000. In default of paying the penalty and fine, he has to serve a total of 125 days’ imprisonment. Another 68 similar charges were taken into consideration in sentencing.

What does this mean to you? 

It is a serious offense for businesses that are not GST-registered to charge and collect GST from their customers. Offenders face a penalty of three times the amount of tax unlawfully collected and a fine of up to $10,000 for each offense.

Please take note that IRAS conducts audits to identify non-compliance with GST laws, including checks on whether businesses charge and collect GST correctly.

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Income Tax – Income Tax Treatment Arising from Adoption of FRS 115 – Revenue from Contracts with Customers


IRAS issued an e-Tax Guide on 12 January 2018 pertaining to the  Income Tax Treatment Arising from Adoption of Financial Reporting Standards (“FRS“) 115 – Revenue from Contracts with Customers.

What is FRS 115?

FRS 115 was developed with the objective of removing inconsistencies and weaknesses in previous revenue requirements, establishing a more robust framework for addressing revenue issues, streamlining the volume of accounting guidance, as well as improving comparability and disclosure requirements.

It applies to contracts which an entity has with its customers. Under the Standard, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, by applying the following steps:

  • Step 1: Identify the contract(s) with a customer;
  • Step 2: Identify the performance obligations in the contract;
  • Step 3: Determine the transaction price;
  • Step 4: Allocate the transaction price to the performance obligations in the contract and
  • Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

Singapore income tax treatment 

1.   For Singapore income tax purposes, the accounting revenue as determined in accordance with FRS 115 would continue to be accepted as the revenue in most cases except where specific tax treatment has been established through case law or provided under the law, (see point 3 below)  or where the accounting treatment deviates significantly from tax principles.

2.   Any upward transitional adjustment that is revenue in nature would be subject to tax and any downward transitional adjustment that is revenue in nature would be deducted from the amount of exempt income or allowed as a deduction (as the case may be), in the year of assessment (“YA”) relating to the basis period in which the FRS 115 is adopted for the first time (hereafter referred to as “initial YA”).

3.  Profits of property developers are recognized for tax purposes when a property development project is substantially completed, i.e. when the Temporary Occupation Permit is granted, regardless of the revenue recognition method adopted for accounting purposes under current accounting standards.  The existing tax treatment for property developers is retained with the adoption of FRS 115.

Have a question regarding the above?

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Singapore GST – ASK Review: Declaration Form On ASK Administrative Concession


In 2017, the Inland Revenue Authority of Singapore had shared that it was reviewing the commonly encountered ASK issues /requests so that the GST: Assisted Self-Help Kit (ASK) Annual Review Guide can be issued to allow businesses to self-assess without the need to disclose such issues to IRAS as long as certain conditions are satisfied.

On 5 September 2017, IRAS issued the revised e-Tax Guide and stated that a list of administrative concessions for common erros discovered in the course of ASK Annual REview can be found in the “ASK: Declaration Form on ASK Administrative Concessions”.  The IRAS states that businesses may enjoy these concessions if the errors fall within the prescribed scenarios.  No approval is required to be sought from the Comptroller for the purpose of enjoying these concessions which would only apply to past errors.   Businesses are required to take remedial actions to prevent recurrence of these errors and submit the “ASK: Declaration Form on ASK Administrative Concessions” to IRAS and retain the declaration for at least 5 years.

However, if IRAS discovers that a business has either wrongly applied, abused any concession, made a false or incorrect declaration or failed to take remedial actions, enforcement actions (such as the recovery of tax and the imposition of penalties) may be taken against the business.

Finally, the scenarios cited in the administrative concessions list are not exhaustive. If the scenarios not covered in the guide or other publications issued by IRAS (e.g. other GST guides or Practice Notes), businesses are advised to write to IRAS, providing full details of the errors.

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Income Tax – A Closer Look of Section 10(1)(g) of the Income Tax Act


Unlike jurisdictions such as Australia, the UK, the US, Singapore does not have a capital gains tax regime.  Gains of a capital nature do not attract any Singapore income tax.  Accordingly, the characterization of the nature of a gain for Singapore income tax purposes has always been a contentious matter in our Singapore tax practice.

In GBU v  Comptroller of Income Tax [2017] SGITBR 3, the ITBR had an opportunity in determining the proper construction of Section 10(1)(g) of the Income Tax Act (“ITA”).  This statutory provision is well known as the “catch-all” provision in that any gains or profits of an income nature would be charged with Singapore income tax even if they do not fall within the heads of charge under Section 10(1)(a) to (f).   The gains in GBU arose from the disposal of share counters by a Singapore company whose principal business is the operation of supermarkets.

Facts of the case and the CIT’s contention

In Years of Assessment 2010 and 2011, the taxpayer derived gains from the disposal of various share counters and the Comptroller of Income Tax (“CIT“) opined that these shares were acquired as part of a profit-making scheme and thus fall under “gains or profits of an income nature” under Section 10(1)(g) of the ITA. The CIT considered the following:

 

  • There was no feasibility study carried out by the taxpayer before the shares acquisition.
  • The taxpayer was concerned with the appreciation of the value of the shares and whether it was able to afford to hold the shares till they had appreciated in value.
  • The taxpayer had a definite holding horizon in respect of the shares – i.e. it had the intention to dispose of the shares before its proposed listing on the Singapore Stock Exchange or when the respective share values “sufficiently appreciate”.  Therefore it could not be considered a long-term investment.

Decision of the ITBR

The Board held that the taxpayer’s acquisition of the shares was for the purpose of long-term investment, and the gains concerned do not fall within Section 10(1)(g) of the ITA. In doing so, the ITBR rejected the CIT’s arguments that these shares were not long-term investments as it reasoned that the listing of the company was not a fixed event at the time of the share acquisition.  Instead, the ITBR was convinced that the taxpayer had taken a long-term perspective towards the appreciation of shares.

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