tax obligations of a tuition centre / agency operator · for a service business like tuition...
TRANSCRIPT
Tax Obligations of a
Tuition Centre / Agency Operator
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Presentation Topics at a Glance
� Obligation as a self-employed individual
� Keeping proper records
� Filing Income Tax Returns
� Avoiding common errors
� Seeking assistance
� Penalties
� Voluntary disclosure
2
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Obligation
as a
Self-Employed
Individual
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Who are the self-employed?
Sole proprietors of registered businesses and persons exercising profession or vocation
Partner of a partnership business (normal partnership, limited liability partnership, limited partnership)
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Obligation as a Self-Employed Individual
Comply with income tax
law
Keep proper records &
accounts for 5 years
File form B / P on time
Report a complete & accurate set of business
income
Register for GST if you meet the registration criteria
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Obligation as a self-employed individual
Medisave Contributions
As a Self-employed
As a Singapore citizen or Singapore permanent
resident
Earn a yearly net trade income of more than $6,000
• Net trade income refers to your gross trade income less all allowable business expenses, capital allowances and trade losses as determined by IRAS
IRAS will issue a Notice of
Computation (NOC) to
inform you of your medisavecontributions
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Keeping
Proper
Records
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Keeping Proper Records
Types of
Records
Source Documents
Bank Statements
Accounting Records & Schedules
Any other records related to business
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As a tuition
centre/agency
operator,
what are the
types of
records I need
to maintain?
Keeping Proper Records
Business records
Assets & Stock
Purchases /Expenses
Revenue / Fees
collection
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Keeping Proper Records
Revenue / Fees Collection
Records of the tuition
fees / commission from tuition
fees collected; Sale of books/test
papers etc
Receipt bookInvoices issued
Returned goods
Goods taken for private
use
Customer’s / student’s records
Refunds made to customers
/ students
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Keeping Proper Records
Purchases / Expenses
Cash receipts to be retained even though the amount is
small.
To provide description if receipt does not indicate items
bought.
When receipt is not issued, to prepare payment voucher with
acknowledgement.
To also maintain purchase/expense record book
with details.
For GST registered businesses, to maintain proper tax invoices as
required.
To refer to GST e-tax guide.
To obtain invoices/receipts when paying for purchase/expenses.
Good practise to arrange such payment through the business
bank account.
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Keeping Proper Records
Assets
Need to prepare a fixed asset schedule at the time the asset
is purchased or when the business is started.
Please refer to sample Fixed Asset Schedule – Appendix 6
of the Guide.
The asset cost is capital in nature & not tax deductible.
However, you may claim capital allowances as well as
the Productivity & Innovation Credit (PIC).
Stocks
Refers to anything purchased for the purpose of sale such as
educational / assessment books.
Encouraged to carry out a physical stock count at the end
of the accounting year.
To refer to sample stock list at Appendix 7.
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Keeping Proper Records
To maintain separate bank accounts for business &
private purpose.
The business bank account should be used solely for
business purpose.
To retain the bank statements / passbook of your business
bank accounts.
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Keeping Proper Records
Manual Records
Recording of your business transactions
in a physical form
Such transactions to be supported by
source documents
Electronic Records
Through the use of a computer and/or
accounting software
Source documents must be kept to substantiate
the business transactions
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Keeping Proper Records
Good Record keeping practice is an important part of your business
Better internal control of your business
An essential source of evidence to detect business losses, internal fraud & theft
Reduces cost & effort during collation of information
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Under the Income Tax Act, you are required to keep the business records for at least 5 years with effect from 1 Jan 2007
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Keeping Proper Records
Source Documents
Category of taxpayers for Record Keeping
Requirements
Record Type Item No Documents RequiredGST-Registered
Businesses
Non-GST Registered
Businesses
INCOME RECORDS
(Records of each
sales transaction)
1Serially numbered receipts issued or cash register tapes or invoices issued
� �
2 Tax invoice/simplified tax invoice issued �
3 Rental Agreement signed by both landlord and tenant � �
4 Books to record goods taken for private usage � �
5 Credit notes for returned goods � �
6 Documents relating to exports � �
7Evidence that payment have been received (e.g. bank statement)
�
BUSINESS EXPENSE
RECORDS
(Records of each
business expense
transaction)
8 Invoice received or Receipt received � �
9
Payment made to individuals/companies for services rendered and the relevant contracts/agreements on the provision of services
� �
10 Payment vouchers for staff remuneration � �
11 Employer’s CPF contributions � �
12 Payment evidence (e.g. bank statement) �
PURCHASE
RECORDS
(Records of each
purchase transaction)
13Tax invoices received, Invoices received or Receipt received
� �
14 Documents relating to imports � �
15 Payment evidence (e.g. bank statement) �
OTHER RECORDS
(FOR GST
PURPOSES)
16 Business goods which were put to non-business use �
17Disposals of business goods, whether or not for a consideration
�
18 Removal of goods from customs-licensed warehouse �
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Keeping Proper Records
ACCOUNTING RECORDS AND SCHEDULES
Category of taxpayers for Record Keeping
Requirements
Record Type Item No Documents RequiredGST-Registered
Businesses
Non-GST Registered
Businesses
ACCOUNTING
RECORDS AND
SCHEDULES
1 Stock List � �
2 Sales Record Book/ Sales Listing � �
3 Purchase Record Book/ Purchase Listing � �
4 General Ledgers � �
5 Balance Sheet, Profit and Loss Statement � �
6GST account summary of input and output tax, including GST refunded to tourists
�
BANK
STATEMENT7
Bank statements; with separate bank accounts for personal and business purposes
� � (Recommended)
Record Type Item No Documents RecommendedGST-Registered
Businesses
Non-GST Registered
Businesses
ACCOUNTING
RECORDS AND
SCHEDULES
1 Detailed schedules of Public Transport expenses � �
2 Detailed schedules of Travelling expenses � �
3 Detailed schedules of Entertainment expenses � �
4 Fixed asset Schedules � �
5 Records of Capital Allowances � �
Note: The “required records” are mandatory records that businesses must keep for tax purposes. The “recommended records” are records that the businesses are advised to keep as good practices, and these should be available, or able to reproduce upon request by the Comptroller of Income Tax or/ GST
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Keeping Proper Records
Set up good filing system for your paperwork from the start of your business
Make sure records can be understood by anyone
Obtain the necessary source documents at time of transaction
Enter transactions accurately & regularly to keep records up to date
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Keeping Proper Records
• These information can be found in our website
• Visit our website at www.iras.gov.sg
• Follow the link : Home > About IRAS > Taxpayer Compliance > Record Keeping Essentials for Businesses
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Filing
Income
Tax Returns
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Filing Income Tax Returns
You will need to report your Tuition business income in a summarized 2 or 4-line statement in
your Form B or Form P
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Filing Income Tax ReturnsFor a partnership :
The precedent partner has to report the business income in theForm P. He/She is also required to inform all the partners of their share of income from the partnership;
The precedent partner is:
- Partner who, among all the partners present in Singapore, is the first named in the partnership agreement.
- If there is no partnership agreement, the precedent partner is a partner who is agreed upon and appointed by the other partners to be the precedent partner.
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Filing Income Tax Returns
For a Partner:
� Check with precedent partner on share of income from partnership
� Report share of partnership income under “Partnership” in the “Trade, Business, Profession or Vocation” section of Form B
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Filing Income Tax Returns
REVENUE
< or = $100,000
REVENUE
< or = $100,000
2-line Statement
1st line – Revenue
2nd line – Adjusted Profit/Loss
REVENUE
< $500 000
REVENUE
< $500 000
4-line Statement
1st line - Revenue
2nd line -
Gross Profit/Loss
3rd line - Allowable Business Expenses
4th line - Adjusted Profit/Loss
REVENUE
> or = $500,000
REVENUE
> or = $500,000
4-Line Statement +
Submit certifiedStatement of Accounts
(i.e. Trading, Profit & Loss Account and Balance Sheet )
To be signed by the sole-proprietor /
precedent partner certifying that
accounts are true and correct
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Filing Income Tax Returns
The 4-Line Statement
1. RevenueTotal payments/fees/commissions received or receivable for
services provided before deducting any expenses.
2. Gross Profit / Loss
For a service business like tuition centre, this is the same as
Revenue. Should a tuition centre sells assessment/
teaching books or materials, the gross profit / loss is
Revenue less Cost of Goods Sold.
3. Allowable
Business Expenses
4. Adjusted Profit/
Loss
Expenses incurred in the course of business.
Gross Profit – Allowable Business Expenses
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Allowable Expenses
Must be related to
your business
Must be incurred during the
production of income
ALLOWABLE EXPENSES
Filing Income Tax Returns
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Allowable Business Expenses (common examples)
Rental paid for business premises
Business entertainment
Advertising, printing & stationery
Upkeep of business
premises & equipment
Employee’s salary, bonus &
allowances
Business related overseas travelling expenses
Public transport usage
Capital allowances on
fixed assets
Filing Income Tax Returns
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Disallowable Expense
Capital in nature
Personal and private in nature
Pre –Commencement
expenses
DISALLOW-ABLE
EXPENSES
Filing Income Tax Returns
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Disallowable Expenses (common examples)
Maintenance cost of private
cars
Personal medical fees, income tax &
insurance of SP/Partner
Entertainment expenses for
family & friends
Food & household expenses
Repayment of loan taken for
business purpose
Cost of fixed assets
purchased
Registration fee for
business
Renovation of business premise
Pre-commencement
expense
Filing Income Tax Returns
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Filing Income Tax Returns
Enhancement to Concession for
Enterprise Development
Expenses incurred before the start of business operation are not allowable as they are not incurred in the production of income.
Introduction of Concessionary treatment:
With the current concession, revenue expenses incurred one accounting year before the *deemed Date of Commencement (DOC) are deductible.
* The first day of the accounting year in which a business earns its first dollar of
business receipt. This is different from the date of incorporation of business.
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Filing Income Tax Returns
Enhancement to Concession for
Enterprise Development
2011 Enhancement to Concession
• Revenue expenses incurred in one accounting year before the deemed Date of
Commencement are deductible • Expenses treated as incurred on the deemed date of commencement• Deductible against business income derived during basis period in which the
business derives its first dollar of business receipt
With effect from Year of Assessment 2012
Filing Income Tax Returns
Example:Mr Lim registered a tuition centre on 1 Dec 2014 to carry on abusiness. Its accounting year ends on 31 Dec. The businessearned its first dollar of business receipt on 5 Feb 2016. It incurredrevenue expenses such as rental expenses, utilities, etc on:(i) 15 Dec 2014(ii) 1 March 2015
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Enhancement to Concession for
Enterprise Development
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With Effect from Year of Assessment 2012
Revenue expenses incurred 15 Dec 2009 / 1 Mar 2010
First dollar
earned
5 Feb 2011 31 Dec 2011
Revenue expenses deductible without
concession
01 Jan 2011
Deemed DOC
Revenue expenses deductible with the
2011 enhancement; Hence, revenue
expenses incurred on 1 Mar 2010 is
deductible.
i) 15 Dec 2009
Filing Income Tax Returns
Enhancement to Concession for Enterprise Development
Not deductible as the
period does not fall
within the concession
criteria
01 Jan 2010
ii) 01 Mar 2010
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Filing Income Tax Returns
More details on this concession can be found in our website by following this pathway :www.iras.gov.sg < For companies < Preparing tax computation < What can be deducted < Business expenses < Tax treatment of specific expenses < Expenses incurred prior to commencement of business>.
Enhancement to Concession for
Enterprise Development
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Avoiding
Common Errors
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Common Errors to Avoid
Incorrect categorization of income
Nature of error made Correct way of reporting
Self-employed income incorrectly reported
under “Employment” or “Other Income”
To declare 2 or 4-line statement under “Trade” if you are carrying on a
trade, business, profession or vocation
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Common Errors to Avoid
Understatement of income
Nature of error made Correct way of reporting
Collections were used to pay for the purchases or
expenses (both private and
personal) & were not recorded
Report gross revenue collection
in full & as far as possible, to pay for
expenses via cheque
Case Study
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Ms Janet is a junior college student who enrolled in RH Tuition Centre for “A Maths” in June 2015. The period of tuition is from June 2015 to May 2016 .
She paid the full amount upon
enrolment :
Registration fee - $25
Books + materials - $75
June 2015 to Dec 2015 -$720;
Jan 2016 to May 2016 - $540
Total amount paid - $1,360
Case Study
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The question isRhow would Ms Wong, the sole-proprietor of RH Tuition Centre update her record for Year of Assessment 2016 in respect of Janet’s tuition
fees received?
Case Study
To record
$820 in
here (part
of fees
collection
for the year
ended 31
Dec 2015) –
Recognition
of income
since the
registration,
enrolment,
materials &
lesson has
been
utilised.
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Case Study
NAME OF BUSINESS: RH Tuition Centre
BUSINESS ADDRESS : 32 Jln Angklong, Singapore 121432
FOR PERIOD FROM 01012015 to 31122015
(enter date in dd-mm-yy)
$ $
Revenue from sale of books/materials - A 75Service Fees received (Turnover) - B 745
Less: Cost of Goods sold - C
Gross Profit (C) = A+B-C
Less: Allowable Business Expenses
(please ensure that you do not claim non-allowable expenses)
Rental Charges
Advertising promotion
Insurance
CPF Contributions
Salaries & wages
Other Running Expenses
(please indicate the nature and breakdown below)i)
ii)
iii)
iv)
Total Allowable Business Expenses
Adjusted Profit
SUMMARY
4-line Statement
$
Turnover Name of taxpayer:
Gross Profit Signature :
Allowable Business Expenses Contact Number :
Adjusted Profit/Loss
STATEMENT OF ACCOUNTS
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Case Study RH Tuition Centre
Balance Sheet for the Year Ending 31.12.2015
ASSETS
Current Assets
Cash
Accounts Receivable
Inventory
Prepaid Expenses
Total Current Assets
Fixed Assets
Land, Buildings
Furniture & Fixtures
Equipment
Total Fixed Assets
Total Assets
LIABILITIES
Current Liabilities
Accounts Payable
Taxes Payable
Accurals
Deferred Income
Total Current Liabilities
Long Term liabilities
Mortgages Payable
Equipment
Total Long Term Liabilities
TOTAL LIABILITIES
OWNER'S NET WORTH
Total Liabilities and Net Worth
To record
balance
amount of
$540 in here
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Common Errors to Avoid
Incorrect claims of personal and private expenses
Nature of error made Correct way of reporting
Private and domestic expenses were claimed as business expenses
To claim only expenses incurred for your
business
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Common Errors to Avoid
Claiming estimated expenses
Nature of error made Correct way of reporting
Estimated amounts are being recorded for both
revenue & expense amount
Estimated amounts are inadequate and not
acceptable for Income Tax purposes; To claim
expenses based on actual amounts.
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Common Errors to Avoid
Claiming private motor vehicle expenses
Nature of error made Correct way of reporting
Expenses in respect of private-plated cars (E or S-plate cars) are being
claimed
These expenses are not deductible even if it is incurred for business
purposes
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Seeking
Assistance
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Service Details Contact
Self help (Record keeping guide) http://www.iras.gov.sg > For sole-proprietors / self
employed > Keeping proper records and accounts >
Basic Record Keeping Guide for Small businesses
Email [email protected]
Income Tax Integrated Phone Service 1800 356 8300
Goods & Services Tax Integrated Phone
Service
1800 356 8633
Taxpayer Services Centre 1st Storey, Revenue House
55 Newton Road, Singapore 307987
(Located opposite Novena MRT Station)
Operating Hours:
8am to 5pm (Mon to Fri)
8am to 1pm (Sat)
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You may seek assistance from:
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Penalties
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Penalties
• Penalties may be imposed for the following offences:
� No proper record keeping
� Failure to submit income tax return
� Furnishing an incorrect return
� Tax evasion
• Penalty varies from a fine to imprisonment dependingon the nature and severity of offence
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Voluntary
Disclosure
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Voluntary Disclosure
The IRAS Voluntary Disclosure Program help taxpayers to come forward to disclose errors or omissions made
Timely voluntary disclosures made within a grace period of 1 year from statutory filing
date
Waiver of penalty
Voluntary disclosures made after grace period
Reduced penalty of
5% p.a. for Income Tax
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Voluntary Disclosure
Qualifying Conditions
For cases already under IRAS's query,
audit or investigation,
taxpayers' disclosure must NOT be under the scope of
query, audit or investigation
Cooperation received from taxpayers to
correct mistakes
made in the past returns
Disclosures must be made
BEFORE IRAS’s commencement
of audit / investigation or letter of query relating to his assessment
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Voluntary Disclosure
www.iras.gov.sg > About IRAS > Taxpayer
Compliance > IRAS Voluntary Disclosure
program
Tel : 6351 3121 / 6351 3122
Email: [email protected]
THANK YOU
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The information presented in the slides aims to provide a better general understanding of taxpayers’ tax
obligations and is not intended to comprehensively address all possible tax issues that may arise. This
information is correct as at 30/09/2017. While every effort has been made to ensure that this information is
consistent with existing law and practice, should there be any changes, IRAS reserves the right to vary its
position accordingly.
© 2017 Inland Revenue Authority of Singapore. All rights reserved.