Tax Investigation & Tax Audit


What is Tax Investigation?

Where the Tax Authority has preliminary information or reasons to believe that a taxpayer is evading tax, the Authority will trigger tax investigation actions. The investigation may cover individual income tax, corporate income tax and GST.

It is important to examine and understand the nature of the tax queries raised by the Authority and acts on how best to deal with it. There have been cases the investigation ends up in court where there are sufficient evidence available for the Authority to prosecute the taxpayer for tax evasion.

So if a taxpayer realises that there are some irregularities in his tax affairs and does not know how to resolve them, it is best that he seeks professional advice on how best to navigate his way out of the trouble. It is strongly recommended that he consults a tax specialist as soon as possible. You can seek an initial discussion with us and we will give you the necessary guidance.

 

How long does a Tax Investigation take?

It depends on the scope of the tax investigation, complexity of the underlying irregularities, and the level and sincerity of the taxpayer’s cooperation he renders to the Authority in the process of the investigation. Normally, an investigation on average may take about 15 to 24 months to complete.

 

Outcome of Tax Investigation?

Prosecution

Where the Authority has established a prima facie case that offences have been committed, it may consider initiating court proceedings to prosecute the errant taxpayer and/or any abettors for tax evasion or other tax related offences.

Composition

In some cases. a “composition” penalty may be imposed on the errant taxpayer in lieu of prosecution and conviction in court for that offence, for example, just incorrect return made.


Wilful Evasion

For wilful evasion, the penalty could go up to treble the amount of the tax. For serious fraudulent evasion, the penalty is set at 4 times the amount of the tax.

No Further Action

Where there is no evidence of wrongdoing, for example, where the irregularity is in the nature of technical interpretation, the case may be closed with just appropriate tax adjustments made and little or no penalty imposed.



 

 


What is Tax Audit?

IRAS tax audit is an inspection of the taxpayer’s business records and financial affairs to ensure the amount of tax that reported and paid are according with tax laws & regulations. The purposes of IRAS’s tax audit programme are:

  1. Ensure your business' tax returns follow the tax law;
  2. Educate your business on your tax obligations and how to comply; and
  3. Identify tax laws, policies and processes where we can simplify or clarify.

Process of Tax Audit

Unlike tax investigation, tax audit is not conducted unexpectedly. Taxpayer will usually receive an advanced notification from the IRAS tax officer either via letter, email or telephone call prior to the auditor’s visit. Such visit by auditor is called a field audit.

Audits are conducted by examining your accounting books, records and financial affairs (business records and non-business records where applicable) to verify that income tax returns submitted are in compliance with tax laws. The auditors might re-visit you on another arranged date again if the requested information or records are incomplete or unavailable.

Conclusion of Audit

Most of the audits are completed within 12 months. After conclusion of audit, IRAS will communicate the outcome by writing or through meeting.

1. Communicating and discussion of the findings

Should there be any adjustment needed, IRAS will explain the basis of the adjustment. Issues are discussed with a view to reaching a mutually acceptable conclusion.

They will also advise on the areas which you could make improvement to better comply with the tax laws.

2. If errors are discovered

Should the audit conclude that errors had been committed, IRAS will issue the Notice(s) of Additional / Amended Assessment and an Offer of Composition (penalty).

If taxpayer is not satisfied with the Notices of Assessments / Offer of Composition, he/she must object in writing within 30 days stating the specific grounds of objection.


How we can help you?

We have a team of experience tax advisors that will work to resolve your tax investigation, tax audit, or tax dispute with IRAS. Contact us today should you have any query on tax issue.

 


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