Should you change your business structure– A Tax Professional’s Angle. 

It was only a decade ago when the Accounting Corporate and Regulatory Authority was strongly encouraging unincorporated businesses or self-employed individuals in Singapore to corporatise. In this wave, many doctors, dentists, lawyers, accountants, consultants, commission agents, private tutors and even renovation contractors gradually moved to set-up their private limited companies. This was to protect themselves from being personally liable for business debts and other losses. Within a short span of time, the IRAS has apparently shifted its position by adopting the view that the tax planning option of changing the business structure not with the sole purpose to obtain tax advantage as tax avoidance. Perhaps this is the right time to ditch the use of the sole-proprietorship or partnership structure, once and for all. It is no longer viable to think that one can simply transfer business from a sole-proprietorship or partnership structure to a private limited company once it becomes profitable.

Today, many SME tax firms struggle to provide quality services to Sole-proprietors and Partnerships due to the relatively high tax compliance burden when compared to private limited companies.  It is not unusual to find that Sole-proprietors and Partnerships simply adopt the easy way out when it is due date to file Form B or Form P.  They simply take the áccounting net profit' and file it as the ádjusted net profit' without undergoing the process of preparing a tax computation to account for tax allowable expenses and non taxable income.  Firstly, this is not right.  Secondly, there could be huge tax savings if a tax specialist is consulted.  Some of the possible tax savings could arise from:

- Capital allowances and business losses claim

- Transfer between married couples

- Loss carry back system.

Companies who do not file their tax returns, audited/unaudited accounts and tax computations by due date (i.e. 30 November or 15 December for Form C and C-S/ 15 April or 18 April for Form P) or late filers will face the following enforcement actions:

- composition fee imposed

- summons to attend court

- other legal actions.