If the business you have set up has been affected by the coronavirus (COVID-19), you might face difficulty in paying tax. You’re not alone. Some businesses are struggling to pay their taxes this year due to the adverse effects of the pandemic.
Thankfully, the Inland Revenue Authority of Singapore (IRAS) is on your side with a series of support measures to alleviate cash flow woes of businesses and individuals.
The Serious Consequences of Ignoring or Delaying Your Tax Payment
We can’t emphasise this enough - it is important to pay your taxes on time. You would need to pay your taxes one month from the Notice of Assessment (NOA), before the due date.
Here are the penalties that could be charged to your company for late payment:
1. 5% penalty imposed on the overdue tax.
2. Additional 1% penalty per month the tax remains unpaid 60 days after the first 5% penalty up to a maximum of 12% unpaid tax.
If the tax continues to be unpaid, IRAS might do the following to recover the taxes:
- Appoint agents like the company’s bank, tenant or lawyer to pay the amount to IRAS
- Take legal action.
So, What Should I do if I am Unable to Pay My Tax on Time?
Business owners and individuals should continue to file returns, as this information is used to help the government and make correct payments to people. Even if you are affected by circumstances, it is important that you do not ignore any tax bills or payment demands. Instead, you can contact IRAS to discuss a suitable payment arrangement that is comfortable for you.
Work Out a Longer Instalment Plan
Together with IRAS, you can work out a suitable payment arrangement, including a longer instalment plan if you are under justifiable circumstances.
These situations include:
For Individual Income Tax
Exorbitant medical expenses
Rebecca’s parents were diagnosed with Stage 3 cancer. As the only child, she has to bear the brunt of the expenses, which amounted to a substantial sum. Due to the exorbitant medical expenses, Rebecca had to take on bank loans to repay that amount, affecting her ability to repay tax for her company and herself. As such, she reached out to IRAS for a longer, feasible payment plan.
Loss of job or substantial reduction in earnings
Stephanie is the founder of a small scale events management company Eventually. Due to the coronavirus situation, she suffered the loss of several big clients since events were prohibited during this trying period. This resulted in substantial loss of income, and she was struggling to pay her employees. This gives her possible grounds to file for a longer payment plan with IRAS.
Business under financial distress
This could include business closure or if you are facing a lawsuit from your creditor
Vincent runs his own Social Media Company Sockets, and his business was adversely affected during the Circuit Breaker period. Business deteriorated to the extent that he had to shutter operations as he was unable to keep the business afloat any further. He then reaches out to IRAS to negotiate for a longer payment plan for his tax.
How to Arrange for a Longer Instalment Plan
Take note that only instalment plans via GIRO will be granted by IRAS. To appeal for a longer payment plan, access the e-Service at myTax Portal and head over to the 'Apply for Payment Plan' section with your SingPass, IRAS Unique Account (IUA) or CorpPass.
For those with existing GIRO account
If you already have an existing GIRO account, simply customise your arrangement in the step-by-step guide by IRAS. In a nutshell, all you have to do is:
- Cancel your existing payment plan
- Arrange for a new payment plan
For those without an existing GIRO account (for Individual Income Tax and Property Tax)
Customise your payment plan with the following steps:
- Apply for GIRO payment (with DBS/POSB or OCBC bank) via myTax Portal
- Arrange for a new payment plan
For a step-by-step payment guide, refer to IRAS for more information.
For those without an existing GIRO account (for Corporate Income Tax and Goods and Services Tax)
If you do not have an existing GIRO account, here’s what you have to do:
- Fill in the hardcopy Master GIRO form and send the completed form to IRAS; and
- Send in your payment proposal online within the same day.
Soft copy forms with e-signatures are not accepted by IRAS.
Upon submission, your request will be reviewed by IRAS and you should know the outcome within 15 working days. In certain circumstances, you might be asked for more information so IRAS can better understand and look into your situation.
If your payment plan is accepted, you must adhere to the payment plan schedule. Failure to do so may result in IRAS cancelling your plan, and even taking actions to recoup the tax.
Other Financial and Support Services Available
The COVID-19 situation is particularly stressful because it's difficult to predict how long this situation will last. If you're in need of other forms of assistance, do not hesitate to contact our experienced accountants and tax experts at Osome.
At an affordable rate, we provide an expert that has your back, knows what to file, which exemptions and reliefs you’re entitled to, and takes care of the documents. You can always get help and advice so you can focus on growing your business - just leave the rest to us.
Read More: How Singapore Will Support Your Business during the Pandemic