5 Tax Mistakes Expats, Entrepreneurs And Investors Make

Money Matters / Personal Finance

5 Tax Mistakes Expats, Entrepreneurs And Investors Make

Tax Director Herdin Syafari of Rawlinson & Hunter shares five common mistakes to avoid this tax filing season.

Written by Xiou Ann Lim on 7 March 2017

In a bid to attract talent, entrepreneurs and investors – Singapore has come up with a number of tax benefits to interest these individuals. With tax filing season in Singapore just around the corner – Tax Director Herdin Syafari of Rawlinson & Hunter shares five common tax mistakes that expats, entrepreneurs and investors often make.

Tax Director Herdin Syafari of Rawlinson & Hunter

Failing to apply for the Not
Ordinarily Resident (NOR) status

Obtaining the NOR status allows taxpayers to pay tax on their employment income, corresponding with the number of days spent in Singapore. “This is a pretty good incentive for foreigners working here, especially those who travel often for work,” says Syafari. Providing some background to the tax benefit, he says the Inland Revenue Authority of Singapore (IRAS) recognises that some foreigners working in Singapore may be doing so in a regional capacity – which is why they came up with this benefit. “But the taxpayer will have to apply for the NOR status within their first year in Singapore, which is valid for five years,” he adds.

Failing to apply to MAS for the Enhanced-Tier Fund Incentive

Under Section 13X of the Singapore Income Tax Act, the Enhanced-Tier Fund Incentive allows income generated from locally managed onshore or offshore funds to be exempted from tax. “However, approval must first be given by the Monetary Authority of Singapore (MAS),” says Syafari. “Also, the fund must be managed by locally based MAS-registered fund managers and be a minimum size of SGD50 million at the time of application,” he adds. Apart from that, he says the fund must also incur a minimum of SGD200,000 business spending a year to qualify for the benefit.

Missing the deadline to claim Productivity and Innovation Credit (PIC) benefits

According to Syafari, businesses often overlook or miss the deadline for claiming their PIC benefits – which allows all businesses to enjoy 400% tax deductions or allowances for expenditure incurred under six qualifying activities: acquisition and leasing of PIC IT and automation equipment; training of employees; acquisition and licensing of intellectual property rights; registration of patents, trademarks, designs and plant varieties; research and development; and investment in design projects.

Failing to register for Goods and Services Tax (GST)

While businesses with a taxable turnover of SGD1 million are liable for GST registration, Syafari points out that a common mistake among entrepreneurs is that they fail to register the company under the prospective view. “This means a business is liable for registration if they forecast that they’ll hit the SGD1 million mark within the next 12 months,” he explains. He warns not to take this lightly, as businesses that fail to register themselves may be slapped with hefty fines. The business forecast must be supported by documents such as signed contracts for upcoming projects or confirmed purchase orders received from customers – not market assessment or business targets.

Failing to apply for tax exemption on foreign-sourced income

Under the Foreign-Sourced Income Exemption benefit, Singapore tax resident companies can enjoy tax exemption on three categories of foreign-sourced income that is remitted to the country: foreign-sourced dividend, foreign branch profits and foreign-sourced service income. “Foreign sources of income are taxed only when the money is remitted to Singapore,” reveals Syafari. “An example is if a Singapore-based company earns fees from consulting service provided in the UK and maintains that money outside of Singapore, it is not taxable until the company tries to bring it to Singapore,” he explains. But even then, he says there are qualifying conditions that allow for tax exemption.

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