In a tax seminar conducted by IRAS late last year, it’s pointed out that family-owned companies in Singapore are exposed to some common errors and mistakes that could cost them more money in terms of penalties and fines.
1. Remuneration paid to relatives
When remuneration is paid to relatives who actually perform services for the company, it must be in commensurate with the scope and extent of services rendered by the relatives. If a company pays a significantly higher remuneration to them, the difference between the actual payout and the market-rate would not be deductible for tax purposes.
2. Private expenses
Private expenses incurred such as family vacations and gifts for relatives are not tax deductible. Capital allowance claims on the purchase of assets not used in the production of the companies’ income. are not allowed.
3. Record keeping
IRAS emphasizes the importance of having a good record-keeping system because all taxpayers are required to produce complete supporting documents when called upon by the IRAS. One example is receipts printed on thermal paper. They should be photocopied and retained as the original printout will fade over time.
If you have any questions regarding the above, contact firstname.lastname@example.org