IRAS rolls out two new corporate tax frameworks in Singapore
In line with the increasing impetus of tax authorities on tax governance and risk management, IRAS has introduced two new frameworks along with the existing GST ACAP.
These new frameworks are:
1.Tax risk management and control framework for corporate income tax (CTRM)
2.Tax governance framework(TGF); and
The frameworks, put together, provide compliance tools that companies can adopt holistically or as independent programs, depending on their readiness and business needs. These frameworks are voluntary in nature.
CTRM- Scope, Eligibility, Benefits & Application Process
CTRM paves the way for a company to establish robust internal controls and systematic risk management processes to identify, mitigate and monitor key corporate income tax risks and increase tax compliance. It allows the company to perform a holistic review of its controls and tax risk management for corporate income tax matters.
The framework comprises a self-review checklist enlisting the processes and measures to ensure that sound controls – i.e., the tax governance structure, entity-level controls, and tax reporting controls – are in place to manage corporate income tax risks.
Who can apply for CTRM
Large companies with complex structures and business models, mainly publicly listed companies and other multinational corporations, can apply for CTRM and take advantage of the benefits of CTRM.
Benefits of CTRM status
1. A one-time waiver of penalties for voluntary disclosure of prior years’ corporate income tax and/or withholding tax errors.
2. Step-down on corporate income tax compliance audit for three consecutive Years of Assessment from the date IRAS awards of CTRM Status.
IRAS accepts a company that is assessed to have an effective CTRM to be generally tax compliant. Accordingly, due consideration and mitigation are applied in respect of isolated instances of non-compliance (where such non-compliance does not involve deliberate tax evasion or severe tax avoidance).
Related Read: Why is Risk Management vital for your business?
How to apply for CTRM status?
The following pre-requisites should be met by the applicant company before applying for CTRM status:
1.The company should have implemented the key controls listed in the CTRM Checklist. (A key control is considered as implemented if 60% or more of the supporting control features of each key control or their equivalents are present.)
2.The statutory auditor’s opinion of the company’s last three years financial statements is unqualified.
3.The company is not currently under any tax audit for avoidance or investigation conducted by IRAS.
4.The company has good compliance records for corporate income tax (including withholding tax), GST, and Property Tax for the last three years and no outstanding tax with IRAS at the date of application to participate in the CTRM.
5.The company has committed to appointing a qualified CTRM Reviewer to conduct the CTRM review.
Upon IRAS’ confirmation of the company’s eligibility to participate in the program, it must complete a self-review of its internal control processes as stated in the CTRM Checklist. The completed CTRM Checklist must be reviewed by a CTRM Reviewer (i.e., a qualified independent third party assessed and approved by IRAS) and submitted to IRAS with all other required documents. The company will be awarded the CTRM Status if IRAS considers that its internal control processes for corporate income tax compliance are adequate and effective and has low compliance risks.
TGF- Scope, Eligibility, application process & benefits
This framework enlists broad principles and critical practices that should be incorporated in a company’s tax governance policy for effective management of tax risks, including Corporate Income Tax (CIT) and Goods and Services Tax (GST).
TGF is centered around three building blocks of good tax governance: compliance with tax laws, governance Structure for Managing Tax Risks, and relationship with tax authorities.
Who is eligible to adopt TGF?
Any company that recognizes the importance of tax accountability and transparency, and is willing to commit to good tax governance practices can engage with the TGF. However, IRAS strongly encourages companies with particularly complex structures and business models to adopt TGF.
Benefits of TGF Status
Companies that are awarded the TGF status enjoy an extended grace period for voluntary disclosure of tax errors:
1.A one-time extended grace period of two years for voluntary disclosure of Corporate income tax and/or withholding tax errors made within two years from the date of award of TGF status.
2.For a GST-registered business accorded ACAP status, a one-time extended grace period of three years for voluntary disclosure of GST errors made within two years from the date of award of TGF status; or for a GST-registered business without ACAP status, a one-time extended grace period of two years for voluntary disclosure of GST errors made within two years from the award of TGF status.
In the long run, adopting the framework helps companies attain and maintain reasonable standards of tax governance and help establish an environment of trust between IRAS and the company, thereby lowering compliance costs and raising tax governance to the attention of the Board of Directors.
How to apply for TGF Status?
A Company can apply for TGF status in the name of a single company or on behalf of a group of companies by:
1.Publishing the company’s tax governance policy on the corporate website or an annual report.
2.Complete the Declaration Form for Tax Governance Framework
3.Submit the TGF Application Form via FormSG
TGF status may be awarded to the company in due course by IRAS after considering various factors, obtaining additional information, and/or documents.
Conclusion
Tax governance and tax risk management are pivotal to good corporate governance. Adopting good tax governance and risk management practices is a win-win for all as it not only contributes to the company’s fair share of taxes but also gives its stakeholders and the general public confidence that the company is transparent in its tax matters.
Companies can incorporate these frameworks in their corporate policies to demonstrate their willingness and commitment to manage their tax compliance risks. It may instill a sense of confidence in the IRAS that the company is sincere in its efforts to incorporate better tax governance which can lead to a lower probability of detailed examination and scrutiny of their tax matters by the IRAS, which in turn will translate to lower tax compliance costs and peace of mind in future.
Do you need to apply for TGF status or any other tax framework?
Frequently Asked Questions
Generally, group companies are expected to adhere to the same tax governance principles set by the parent company.
If a company’s tax governance policy no longer adheres to the three building blocks of TGF, or if it no longer meets the requirements of the TGF, a company should inform IRAS in writing.
A request to withdraw from TGF should be made in writing.
The CTRM Status is valid for three years and renewable before the third year’s end.
