How Long to keep Accounting Records in Singapore
Feb 1
4 min read
0
28
0
What are accounting records?
Accounting records refer to source documents that support business transactions. These can be invoices, bank statements, receipts, vouchers, or any relevant documents provided or received in the course of your business. These documents usually facilitate the preparation of accounting records, which eventually translate to the formation of your financial statements (Income statements, Balance Sheet, Cash flow statements).
Minimum time to maintain Accounting Records - ACRA
One of the most common question that we come across especially for foreign entities seeking to start a business or office in Singapore will be "How Long to keep Accounting Records in Singapore?"
Before January 1, 2007, the minimum period to keep accounting records in Singapore is seven years. Starting January 1, 2007, however, all firms in Singapore can keep their accounting records for at least five years.
How Long to keep Accounting Records in Singapore - IRAS
Another legal requirement for record-keeping requirements comes from the Inland Revenue Authority of Singapore (IRAS). Financial documents, business records (sales records, accounting transactions & tax-related documents), and other additional records should be maintained for at least 5 years after the relevant YA. This requirement may be extended, especially when you are in the process of an IRAS objection or tax dispute. It is common for companies to keep accounting records over the prescribed period for tax purposes.
Proper Record Keeping
Accurate and reliable record-keeping is essential to maintaining the integrity of your financial statement. The company may store its accounting records, including financial statements, at the registered office or a place deemed safe and appropriate by the company directors. Alternatively, companies may use trustworthy external vendors with a reliable record-keeping system to archive their financial statements and other financial records.
Companies that process their financial statements and other accounting records using accounting software will have them in electronic format. Such electronic record-keeping systems can be adopted to ensure that all business records are stored securely for the prescribed period. Alternatively, they may also be transferred to a secured system designed specifically for archiving.
Importance of business record keeping
Accurate record-keeping is essential, especially in the event of a statutory audit. Statutory boards such as ACRA, IRAS, or any statutory department may request an audit of your annual filings. Depending on the audit plan, the audit committees assigned may request sample testing or a full audit, which will require a company to provide 100% of the company books.
Many companies belittle the keeping of accounting records as an administrative task. Detailed records are the best evidence of transactions connected to your business. They form the foundation of your accounting schedules, translating to vital company records such as your financial statements. Improper record-keeping will inevitably impact your financial statements' integrity, particularly your tax reporting framework. Inadequate internal controls relating to business record keeping may jeopardize the accuracy of tax filings, leading to doubts about the accuracy of business expense records and income records. These two detailed records form the underlying fundamentals of your tax returns.
Here are a few key examples:
Poor record keeping of the fixed asset will lead to unverified records of capital allowances. Claims of such unverified expenses may result in an income tax offense as they contravene regulatory requirements.
Failure to keep accounting records relating to expenses may result in unverifiable deductions. Payment evidence such as payment vouchers, payments to individual suppliers, and records of entertainment and public transport expenses may all well be challenged if no adequate records are present. Companies who insist on these deductions may be required to provide additional transaction evidence. Ultimately, companies that fail to declare an accurate assessment of their tax positions may face adjustments in tax assessments. Financial penalties may be imposed in severe cases, and further legal action may be taken against companies based on failure to execute tax compliance obligations.
Best practice for a company
Companies should have a stringent set of record-keeping standards in place. Having good record-keeping practice is a necessary obligation for good compliance. With digital company records becoming more popular over traditional paper records, accounting software programs that store copies of source documents and financial statements are increasingly popular. Most business documents, such as financial statements, are now stored digitally instead of physically. There are also imaging systems that enhance the efficiency of digital records. The electronic forms ensure accuracy and allow the statutory board to have accessible business records.
Corporate service companies can also play an essential role in the record-keeping of critical business documents. At usually an affordable cost, they can help maintain key records such as registers of directors, details of company officers, resolutions, and other relevant transactions. They may also assist business owners in ensuring that annual return records are kept appropriately.
Conclusion
Although record keeping is a compliance matter, business owners should view keeping financial statements and other critical financial transactions as a business commitment. From time to time, a company may face various potential audits, and it is unwise to scramble whenever that happens. With technological advancement, business owners may make use of accounting software for the storage of comprehensive records. Investment in a sound record-keeping system may go a long way in helping your business comply with tax obligations by having available accurate business records.
The retention periods stated in this article are the minimum requirement for companies. If disputes or controversies occur, it is advisable to maintain records for a longer period. Should you require further clarification, do feel free to reach out to us!
References
-----------------
DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily represent the views and opinions of any individuals or organizations with which the author may be affiliated, either in a professional or personal capacity, unless explicitly stated.
-----------------
Related Posts
