Is the company having doubts about how long to keep accounting records in Singapore? Then, this article will clarify particular qualms of Singapore firms. We all know that, anywhere in the world, accounting records exist as primary sources of data and proof used in preparing, verifying, and auditing financial statements.
They also include papers that prove ownership of assets for liability creation and proof of all transactions. Thus, good business records are crucial, from handling costs for tax, legal, or regulatory reasons to merely managing and growing a business.
How Long to Keep Accounting Records in Singapore: Why Keep Accounting Records?
All firms are aware that knowing how long to keep accounting records in Singapore is the basis for the accounting foundation. In Singapore, firms must keep records and books of business transactions properly. The main reasons for this requirement are as follows:
- To describe the financial position and transactions of the firm; and,
- To make possible the preparation of fair and trustworthy company financial reports.
Other benefits of doing proper keeping of accounting records are as follows:
- To facilitate the good handling of company finances, aside from allowing the management team to always stay abreast of the financial status of the business;
- To safeguard that the firm obeys its tax burdens; and,
- To ward off embezzlement or double-dealing.
How Long to Keep Accounting Records in Singapore: What Records Must Companies Keep?
Before diving into how long to keep accounting records in Singapore, you must first know what records your company is expected to keep. The IRAS or Inland Revenue Authority of Singapore requires companies to maintain proper accounts and records of business dealings, including:
- Accounting books, schedules, and registers that specify expenses, receipts, payables, resources, gains, and losses of a business;
- Any other proof of transactions on paper concerning the business; and,
- Source documents logging all company dealings, like bank statements, receipts, bills, vouchers, and other allied documents given to and taken from customers.
Irrespective of the business being GST-registered or otherwise, records are kept as a rule. Note that a GST-registered firm is mandated to keep tax invoices released for income reasons and forms of business goods disposal. In contrast, maintaining these records remains optional for non-GST listed companies.
How Long to Keep Accounting Records in Singapore: Required Period to Keep Records
Before the accounting period end of January 1, 2007, the bare minimum period for how long to keep accounting records in Singapore is seven years. Starting January 1, 2007, however, all firms in Singapore can keep their accounting records for a minimum of five years.
For example, if the company’s financial year ends on December 31, its 2021 accounting records are kept until December 31, 2026. Note that the Assessment year for the 2021 financial year is 2022. If the company’s financial year ends other than December 31, the same prescribed period for record-keeping applies.
For struck-off companies, meaning dissolved, the company officer must immediately before dissolution ensure that the papers and books of the business are kept for five years or more after the company’s dissolution date. The same rule applies to companies being wound up. In this case, the company liquidator is responsible for maintaining the required prescribed period for record keeping of the business.
How Long to Keep Accounting Records in Singapore: Impact of Non-Compliance
Company records are poorly kept when the mandatory accounting records are neglected or destroyed, not maintained for five years or more, or stored improperly or out of place. If accounting books and records are improperly kept, the business and its relevant officer can pay a fine not exceeding SGD 5,000 or imprisonment for up to 6 months.
On top of that, there, too, is a Companies Act default fine that requires settlement. Overall, improper record-keeping constitutes an income tax wrongdoing that brings about the IRAS to disallow the company’s capital allowances and expense claims.
Persons found responsible for the incorrect keeping of records related to income tax may likewise be fined SGD 1,000 or less, if not jailed for half a year or less for nonpayment as stated in the Income Tax Act.
Where and How Long to Keep Accounting Records in Singapore
If you’re wondering how long to keep accounting records in Singapore, companies are mandated to keep their records for five years or more from the financial year’s end, where the relevant transactions took place. Thus, this means keeping them at the registered business office or anywhere the company directors think is appropriate.
The important point, though, is that these records are always open for review by the Board of Directors. Therefore, the more essential papers must be stored in a fireproof file cabinet, safe-deposit box, or vault. Tight spaces, therefore, must be decluttered.
Another option is for management to consider electronic storage for some financial records. After all, business documents online or scanned are convertible to an electronic form. So, technically speaking, any of the two techniques can be used, even simultaneously.
Also called the paper method, this is perfect for companies loyal to customary accounting. In this case, it is highly suggested that photocopies of records are also kept as a reserve. However, note that this technique requires considerable storage space, installation of security measures, and a lot of record organization. On top of that, paper records are more prone to incidents like coffee spills and loss of documents.
In this digital age, the well-organized storing method is digital storage or software. Still, security arrangements are required to ensure that records are stored safely to prevent tampering. This system frees the company from maintaining physical source paper copies that confirm business transactions at tax seasons.
Electronic records have various forms, with scanned receipts and invoices as the most common forms. Scanning invoices, payables, and other accounting records save plenty of hours, paper, and storage space. It also reduces clutter in the office while facilitating almost instantaneous processing of financial data.
How Long to Keep Accounting Records in Singapore: Conclusion
So, it is now clear that practicing good keeping of accounting records is beneficial for business operations and compliance with Singapore’s legal requirements. For those considering engaging professional support on record-keeping in Singapore, check out SJH Advisory.
It is a company secretarial and accounting firm in Singapore that provides services to free business owners from mundane and dull work at a reasonable cost. With SJH Advisory, companies will stop worrying over how long to keep accounting records in Singapore!