What would happen if your company fails to pay taxes on time?

In Singapore, conforming to Government’s regulations is strictly required, especially in paying taxes on time after company registration. Most companies follow this code of conduct, which is partly due to strict penalties for failure to pay taxes by due date. This article will give you detailed information on penalties for late payment or non-payment of taxes.

 

Late Payment Penalty

Companies have one month from the date of the Notice of Assessment (NOA) to pay their tax.

A company is required to pay the tax as shown in the NOA even if it has filed an objection and is awaiting the outcome. If the assessment is subsequently revised, any excess payment would be refunded to the company.

If payment is not received by the due date, a 5% penalty and subsequently an additional 1% penalty will be imposed for every completed month (up to a maximum of 12% of the tax outstanding).

Companies will be informed of the 5% penalty via a late payment penalty letter. Payment must be made by the due date stated on the letter to avoid further enforcement actions.

 

Imposition of Additional Penalty

Additional penalties of 1% per month may be imposed if the tax remains unpaid 60 days after the imposition of the 5% penalty. The 1% penalty will be imposed for each completed month that the tax remains unpaid, up to a maximum of 12% of the tax outstanding (inclusive of the 5% late payment penalty).

To prevent unintentional late payment of taxes, it is advised that companies employ taxation services and accounting services / book-keeping services to support your company in tax procedures.

 

Further Enforcement Actions

If the tax continues to be unpaid, other actions to recover the taxes may include:

  • Appointing agents like the company’s bank, tenant or lawyer to pay the moneys to IRAS; and/or
  • Taking legal action.

In addition to the recovery actions, IRAS may concurrently impose an additional 1% penalty on the overdue tax for each month that the tax remains unpaid.

 

Releasing Appointed Agents

Agents will only be released from the appointment after the tax and penalties have been paid, or when payment has been arranged with IRAS.

Note:
For banks appointed as agents, requests for release cannot be processed on Saturdays, Sundays and Public Holidays. Any request for release of bank after 2pm on weekdays can only be processed on the next working day.

 

Appeal for Late Payment Penalty Waiver

Appeals have to be made online via myTax Portal and will only be considered if the following conditions are met:

  1. You have paid the overdue tax in full, by the due date as stated in the late payment penalty letter; and
  2. This is your first appeal; or 
    b. You have filed and paid on time for the past two years.

 

It is understandable that sometimes, taxes can be a burden to businesses. However, in Singapore, you can obtain plenty of Tax Reliefs or Government Grant and Subsidies to help reduce the tax bills. Meanwhile, it is suggested that businesses acquire latest relevant information in order to ensure compliance to tax policies.

 

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