IRAS collaborated and co-designed new frameworks with stakeholders

The Inland Revenue Authority of Singapore (IRAS) rolled out two new tax frameworks, the Tax Governance Framework (TGF) and the Tax Risk Management and Control Framework for Corporate Income Tax (CTRM), to help companies strengthen tax compliance. The TGF and CTRM complement the existing Goods and Services Tax Assisted Compliance Assurance Programme (GST ACAP). Together, they provide a suite of voluntary compliance tools (see Annex A - Overview of IRAS’ Tax Governance and Tax Risk Management Initiatives for Companies) that companies can adopt holistically or as independent programmes, depending on their readiness and business needs.

Tax Governance Framework

The TGF focuses on strengthening the tax governance standards in a company and elevating them to the Board level. It features a set of broad principles and practices around three main building blocks of good tax governance: compliance with tax laws, governance structure for managing tax risks and relationship with tax authorities. The framework is applicable to both Corporate Income Tax (CIT) and Goods and Services Tax (GST), and can be adopted by any company willing to commit to good tax governance. Companies that attain the TGF status can enjoy a longer grace period for voluntary disclosure of tax errors:

(i)              A one-time extended grace period of two years for voluntary disclosure^[1] of CIT and/or withholding tax errors made within two years from the date of award of TGF status.

(ii)             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.

Tax Risk Management and Control Framework for Corporate Income Tax

Targeted at large companies with complex structures and business models, the CTRM guides these companies in establishing robust internal controls and processes to identify, mitigate and monitor key CIT risks. The framework comprises a self-review checklist featuring processes and measures that would demonstrate that sound controls – i.e., the tax governance structure, entity-level controls and tax reporting controls – are in place to manage tax risks. Eligible companies that attain the CTRM status will enjoy these benefits:

(i)              A one-time waiver^[2] of penalties for voluntary disclosure of prior years’ CIT and/or withholding tax errors.

(ii)             Step-down on CIT compliance audit for three consecutive Years of Assessment from the date IRAS awards the CTRM Status.

“While the TGF, CTRM and GST ACAP are voluntary compliance initiatives that operate independently, we strongly encourage companies to adopt all three frameworks to ensure proper internal controls and systems are in place to manage their tax risks. By doing so, companies will give confidence to their stakeholders that they are effective in managing tax risks and transparent with their tax matters, as well as enjoy lower compliance costs in the long run. IRAS will continue to work closely with companies to enable them to build a sustainable infrastructure that supports voluntary compliance,” said Mr Ng Wai Choong, Commissioner of Inland Revenue/Chief Executive Officer.

Collaboration with Stakeholders to Co-Design Tax Frameworks

To ensure that the frameworks meet the needs of companies, IRAS co-designed the frameworks with various stakeholders including the Singapore Chartered Tax Professionals (SCTP), Big 4 accounting firms and several large companies during the development phase. IRAS also conducted a pilot programme with four large corporate groups to test out the frameworks, and incorporated the feedback gathered from the pilot groups into the final frameworks.

Singtel was one of the four corporate groups that participated in the pilot programme. Mr Arthur Lang, Singtel Group Chief Financial Officer, said, “The pilot programme was a good opportunity for us to collaborate with IRAS on a proactive review of our tax risk management practices, and at the same time, offer our feedback for IRAS’ calibration of the CTRM and TGF. This holistic and structured review has affirmed the effectiveness of our tax controls and helped us to further enhance their efficacy.”

SCTP Chairman Mr Low Weng Keong also encouraged companies to invest efforts to address tax risks and liability exposures. He said, “As the pace of international tax reforms continues to accelerate, good tax governance will be increasingly expected. The principle-based frameworks, TGF and CTRM, will help companies to put in place a systematic structure that would prepare them for the future as well as reinforce Singapore as a responsible and transparent location for business.”

More details on the eligibility criteria and the application process for the two frameworks can be found on the IRAS website here. For enquiries on the TGF and/or CTRM, please call the IRAS Helpline at 1800 356 8622 or email to [email protected].

Inland Revenue Authority of Singapore