One of the essential duties your company in Singapore has is bookkeeping, which involves keeping accurate records of your business’ financial transactions to ensure smooth business operations.
Being aware of the record keeping requirements in Singapore helps you stay organized and manage your business effectively and is also necessary to comply with Singapore’s legal and regulatory requirements.
In this article, we will provide a comprehensive guide to the record keeping requirements in Singapore for 2023. We will cover the types of records you need to keep, how to maintain them, and the consequences of failing to comply with these requirements.
Whether you are a new business owner or have been in business for years, this guide will provide the information you need to ensure your business remains compliant and financially sound.
What is Record Keeping?
Record keeping refers to the practice of creating and maintaining accurate and complete records of financial and non-financial transactions, events, and activities.
Accurate and thorough records are fundamental to accounting principles, making record keeping one of its basic foundations. It is imperative for businesses to comply with the record keeping requirements in Singapore.
These requirements mandate that businesses maintain accurate and complete financial records that document all transactions, including physical and electronic source documents with transaction dates and amounts, legal contracts, and private customer and business details.
Relevant authorities such as the Inland Revenue Authority of Singapore (IRAS) set forth the record keeping requirements in Singapore.
IRAS requires companies to maintain accurate records of all financial transactions, for at least five years from the relevant Year of Assessment (YA). Non-compliance with this mandate can lead to penalties and legal repercussions.
Importance of Record Keeping For Your Business
Effective record keeping practices are not only important for monitoring regular activities and making informed decisions but also for meeting tax obligations. The record keeping requirements in Singapore mandate that companies maintain accurate and complete financial records.
These records serve as evidence for the company’s financial transactions and help to fulfill its tax obligations in Singapore. Maintaining accurate and up-to-date records ensures that businesses can:
Monitor the company’s progress
Maintaining accurate records of a business’s performance is essential for monitoring its progress. Such records can facilitate the identification of areas where the business excels, which products or services are in high demand, and what modifications may be required.
Companies can enhance their prospects of success by ensuring they keep meticulous records.
Prepare the financial statements
Creating precise financial statements, such as profit and loss and balance sheets, necessitates meticulous record keeping. These statements provide valuable information to help a business deal with its bank or creditors and manage its finances effectively.
Having well-organized records ensures that financial statements are reliable and can be used to make informed business decisions.
Identify sources of income
Businesses acquire funds or assets from diverse channels, and keeping precise records can assist in identifying the sources of income.
This knowledge is crucial in distinguishing between business and non-business earnings and computing taxable income by distinguishing it from nontaxable income.
Keep track of expenses
Failing to record expenses promptly can lead to forgetting them when preparing the tax return. Maintaining accurate records of expenses is thus crucial to ensure claiming all eligible deductions.
Prepare tax returns
Preparing accurate tax returns requires maintaining good records. The recorded income, expenses, and credits must support taxpayer reports on their tax return. Business owners can also use the records to monitor a business and prepare financial statements for tax return preparation.
Support items reported on tax returns
IRAS may inspect business owners’ records at any time and they must always be available for inspection. During tax return audits, business owners may be required to clarify the reported items. Keeping comprehensive records can accelerate the audit process.
What Records Should You Keep for Your Business?
Keeping track of various record keeping requirements in Singapore is important to effectively manage your business.
Businesses need to keep accurate and complete records such as income records, business expense records, purchase records, accounting records and schedules, as well as bank statements.
Income records include serially numbered receipts, cash register tapes, or issued invoices. In addition, it is essential to maintain tax invoices or simplified tax invoices and rental agreements signed by the landlord and tenant.
Keeping track of books recording goods taken for private usage, export documents, and credit notes for returned goods are also necessary.
Business expense records
Accurate records of business expenses typically include invoices or receipts received for goods or services purchased, as well as payments made to companies or individuals for rendered services.
Maintaining relevant agreements or contracts on providing services to support these payments is also important. Payment vouchers for staff remuneration and documentation of employer’s CPF contributions are also necessary for business expense records.
Keeping detailed purchase records is essential for managing inventory and ensuring regulatory compliance. These records should include tax invoices, invoices received, or receipts for all goods purchased.
Additionally, documents relating to imports, such as bills of lading and customs declarations, should be maintained to support these purchases.
Accounting records and schedules
Accounting records and schedules should include a stock list, sales record book or sales listing, and purchase record book or purchase listing to provide a clear picture of inventory levels and sales activity.
General ledgers are also necessary to track all financial transactions, including revenue and expenses. Maintaining a balance sheet and a profit and loss statement is critical for understanding the business’s financial health.
Furthermore, companies should keep detailed schedules of public transport expenses, traveling expenses, and entertainment expenses. These records help the company monitor expenditures and identify areas where business owners can implement cost-saving measures.
Additionally, businesses should maintain fixed asset schedules and records of capital allowances, as these enable the company to track its assets and determine the value of tax deductions it can claim.
One of the important records that businesses must keep is their bank statements. Separate bank accounts for personal and business use are advisable. Doing so helps keep track of the business’s financial transactions and separate them from personal expenses.
Having separate bank accounts also makes reconciling the records and preparing financial statements easier.
Required Records and Recommended Records
For tax purposes, businesses are obligated by law to keep required records. These records are crucial to guarantee that the business complies with tax regulations and includes crucial information such as income, expenses, and taxes paid.
Furthermore, maintaining recommended records as best practices is encouraged by businesses to support their financial operations. The Comptroller of Income Tax or GST may request these records, and they should be readily available or reproducible upon request.
What Are The Record Keeping Requirements in Singapore?
Adhering to record keeping requirements in Singapore is crucial for businesses to comply with local laws and regulations. The Inland Revenue Authority of Singapore (IRAS) has established specific record keeping requirements in Singapore that businesses must follow.
These requirements apply to both hard copy and electronic records, and the company’s directors can organize them as they see fit. These include:
- Maintenance of accurate records for all financial transactions, including source documents, bank statements, accounting records, and other transaction-related documents.
- Maintenance of these records for at least five years from the relevant YA.
If businesses maintain records in electronic form, they must ensure the ability to reproduce them in hard copy form, to comply with record keeping requirements in Singapore. Failing to comply with these regulations may lead to penalties and other consequences for businesses.
Consequences of Not Complying With Record Keeping Requirements in Singapore
Businesses in Singapore must prioritize proper record keeping to avoid penalties and comply with the law. Adhering to record keeping requirements in Singapore, the IRAS guidelines dictate that companies must retain their records for at least five years from the relevant YA.
The consequences of not complying are disallowed expenses and penalties. Business records are considered not properly kept if they are not maintained, kept for less than five years, or stored in an improper place or manner.
Improper record keeping can lead to fines of up to $5,000, a jail term of up to 12 months for the company and relevant officers, and default penalties under the Companies Act.
Additionally, it may constitute an income tax offense that could result in the disallowance of expense claims and capital allowances. Those found guilty of improper record keeping under the Income Tax Act may face fines of up to $1,000 or a jail term of up to 6 months in default of payment.
How we can help - SJH Advisory’s accounting and bookkeeping services
Compliance with record keeping requirements in Singapore is essential for business owners to avoid penalties and legal issues. Maintaining accurate and comprehensive bookkeeping records of your company’s transactions and financial affairs is a key part of this compliance.
At SJH Advisory, we understand that record keeping can be challenging for many business owners. To assist you in meeting record keeping requirements in Singapore, we offer various services customized to meet your business needs.
Our experienced professionals will collaborate with you to determine the specific record keeping requirements in Singapore that apply to your business.
We will then create a tailored record keeping system that ensures your financial statements, corporate records, and other documentation are accurate and up to date, thus ensuring compliance with record keeping requirements in Singapore.
By choosing SJH Advisory, you can be confident that your business’s records comply with regulations. Our professionals will work with you to develop a customized system that meets your specific record keeping requirements in Singapore and focus on growing your business.
Contact us today to get a FREE consultation and learn more about how we can help you meet record keeping requirements in Singapore.
Record Keeping Requirements In Singapore - Frequently Asked Questions
In the event that your company has been dissolved due to striking off, it is the responsibility of any company officer prior to the dissolution to make sure that all company books and papers are kept for a minimum of five years from the dissolution date.
Similarly, if your company is undergoing liquidation, the liquidator is responsible for ensuring that all company books and papers are maintained for at least five years from the dissolution date.
Company records should be kept for a minimum of 5 years following the end of the financial year in which the transactions took place.
To illustrate, if your business’s financial year ends in December, records for the financial year of 2018 (from January 1, 2018, to December 31, 2018) should be retained until at least December 31, 2023.
Based on the record keeping requirements in Singapore, the company’s records must be kept at its registered office, or any other location deemed appropriate by its directors. Furthermore, these records must be available for inspection by the directors at all times.
Non-compliance with record keeping requirements in Singapore is a matter taken seriously by IRAS, regardless of whether improper record keeping was intentional or not. Records must be maintained and stored properly for at least five years.
Failure to comply may result in fines of up to $5,000 or a prison term of up to 12 months for offenders, including relevant staff and directors. The Companies Act may also impose a default penalty if necessary.
Additionally, under the Income Tax Act, individuals convicted of tax-related record fraud may face a fine of up to $1,000 or imprisonment for up to six months if they cannot pay.
Improper record keeping may also lead to an income tax offense, resulting in the rejection of capital allowances or expense claims by IRAS.
Yes. Accounting software can greatly benefit companies in managing their record keeping requirements in Singapore. Specifically, accounting software can also enhance a company’s record-keeping standards and ensure compliance with tax obligations.
IRAS’ Accounting Software Register Plus (ASR+) is a list of software that Singapore companies are encouraged to adopt to manage their day-to-day business operations and transactions digitally, as well as fulfill their tax obligations seamlessly.
There is no requirement to transfer accounting transactions from old software to new software. However, after getting new software, it is important to keep old records for at least 5 years and maintain associated business documents.