Q. Does my company require an annual audit? Am I eligible for audit exemption?
Currently, a company is exempted from having its accounts audited if it meets the definition of a “small company” concept. Notably, a company no longer needs to be an exempt private company to be exempted from audit.
A company qualifies as a small company if:
it is a private company in the financial year in question; and
it meets at least 2 of 3 following criteria for immediate past two consecutive financial years:
- total annual revenue ≤ $10m;
- total assets ≤ $10m;
- of employees ≤ 50.
For a company which is part of a group:
the company must qualify as a small company; and
entire group must be a “small group” to qualify to the audit exemption.
For a group to be a small group, it must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.
Where a company has qualified as a small company, it continues to be a small company for subsequent financial years until it is disqualified. A small company is disqualified if:
- it ceases to be a private company at any time during a financial year; or
- it does not meet at least 2 of the 3 the quantitative criteria for the immediate past two consecutive financial years.
Where a group has qualified as a small group, it continues to be a small group for subsequent financial years until it does not meet at least 2 of the 3 the quantitative criteria for the immediate past two consecutive financial years.
Q. Why do companies have audits?
Companies invest in an audit for a number of reasons. Larger companies are required to do so by law, but many would do so anyway even if there were no statutory obligation – as in the USA. An independent audit is crucial to good corporate governance and essential to an effective internal financial control function.
Above all, an audit adds credibility to information provided to shareholders. It provides assurance to investors and other providers of finance who are able to make their decisions in a safe environment, with confidence. Safety and confidence reduce the cost of capital and make companies competitive and profitable.
Companies invest in an audit in order to:
- ✓ Satisfy stakeholders such as employees, customers, suppliers and pressure group, as well as the investing community, as to the credibility of published information
- ✓ Facilitate the payment of corporate tax, good and services tax, and other taxes on time and accurately, thereby avoiding interest, penalties and investigations
- ✓ Enable them to comply with banking covenants
- ✓ Help deter and detect material misstatements through fraud or error
- ✓ Facilitate the purchase and sale of businesses
- ✓ Take advantage of the spin-off benefits such as advice on the structure and operations of systems
- ✓ Demonstrate good corporate governance and citizenship
Q. Are audit fees regulated and is there a scale for fees?
Audit fees are not regulated and there is no scale reference for auditors. Auditors generally charge fees according to time spent on the audit assignment. Fees also reflect the level of skill and experience required and the level of responsibility and complexity involved in our client’s work. Alternatively, fees are charged on agreed terms between the auditor and the client.
Q. Must my company adhere to certain accounting standards for compliance purposes ?
Generally, any company incorporated in Singapore must follow the Singapore Accounting Standards, which is gazette in under the Companies Act. Auditors have a set of accounting and auditing standards to adhere to in any set of financial statements.
Q. Can I do a review instead of an audit ?
Review engagements are becoming more common. Many companies see a review as a cost-effective alternative to an audit. There is a significant difference between an audit and a review; the level of assurance provided by a review engagement is substantially lower than the level of assurance provided by an audit engagement.
A review engagement differs from an audit engagement in the following aspects:
- ✓ Audit engagements provide a high level of positive assurance, often expressed in ‘true and fair” terms; review engagements only provide a moderate level of assurance, often expressed as ‘negative’ assurance and reviewers commonly state that nothing has come to their attention to indicate that the information reported on has not been ‘properly prepared’.
- ✓ Audit engagements require the auditor to asses the accounting and internal control systems, to perform detailed tests of control and substantive procedures, and to corroborate explanations received; review engagements rely substantially on analytical procedures and reviewers are not required to assess the accounting and internal control system or to corroborate explanations received.
- ✓ The level of assurance provided by a review engagement depends on the amount of work performed by the reviewer, which may not be clear to those seeking to rely on the review. Review engagements are less likely to detect material misstatements than audit engagements.
It is important that practitioners ensure that directors understand the limitations of review engagements, particularly when they are seeking review services, and whereby previously, an audit was conducted.
Q. Why should smaller companies invest in a voluntary audit ?
Audit adds value. Smaller companies invest in audits for the same reasons as larger companies, but there are particular issues facing smaller companies that make investment in an audit worthwhile:
- ✓ The cost of the audit is often marginal for very small companies, particularly where the auditor is involved in the preparation of the statutory accounts.
- ✓ Small companies who prepare their own accounts often need help in arriving at adjustments, such as those for obsolete stocks, bad debts and other provisions
- ✓ Small companies grow, and may find themselves subject to a statutory audit requirement – the first year and the subsequent years of an audit can be very trying if the accounts are not in good order
- ✓ An audit is essential in financing negotiations, take-over and buy-out
- ✓ The close involvement of the auditor provides companies with comfort when faced with tax and regulatory investigations
Directors of smaller companies may believe, for example, that because there is no longer any statutory audit requirement, there will no longer be any external ‘checking’ of the books and records. The power and resources of the Inland Revenue Authority of Singapore and the Department of Customs and Excise are not to be underestimated and are increasing all the time. This means that there are likely to be more investigations in the future and that these are likely to be more thorough.
Q. what is a collective sale?
A collective sale (or more commonly termed en-bloc sale), is a combined sale by the owners of 2 or more property units to a common purchaser. The most common en-bloc sale is the sale of all the units in a strata or flatted development to a purchaser. The sale proceeds are then divided amongst all the unit owners. Other variations of en-bloc sales include the sale of all units in a development together with an adjoining development or landed properties.
Q. what do the 2007 amendments to the land titles (strata) act cover?
Before the 2007 amendments, an en-bloc sale of all the units in a strata or flatted development could take place only if a specified majority (based on share value, share in land or notional share) of the unit owners agreed. The 2007 amendments provide that, in addition to the specified majority (based on share value, share in land or notional share), there must also be a specified majority of the total area of all the lots in a strata or flatted development before they may apply to a Strata Titles Board for an order that all the units and the land in the development be sold.
Q. what are the types of developments for which an application can be made for an order for en-bloc sale under part va of the act?
The developments for which an application can be made for an order for en-bloc sale by majority agreement are:
1. Strata developments registered under the Land Titles (Strata) Act;
2. Strata or flat developments where the owners of the flats also own a share in the land and the leases for their flats are registered under the Registration of Deeds Act or the Land Titles Act; and
3. Strata or flat developments where the owners of the flats own a registered leasehold tenure of 850 years or more (or such other leasehold period as the Minister may specify) but they do not own the land in the development. The leases for the flats may be registered under the Registration of Deeds Act or the Land Titles Act.
4. As there are no share values or shares in land assigned to flats in such developments, the owners of at least 25% of the total number of flats in the development must apply to the Registrar of Titles for notional shares in land to be assigned to their individual flats to facilitate calculation of the majority agreement.
[Section 84E (2)]
5. Strata developments where the owners of the flats own a registered leasehold tenure of 850 years or more (or such other leasehold period as the Minister may specify). The subsisting leases for the strata lots are registered under the Land Titles (Strata) Act.
Q. what is the required majority which must be obtained before an application can be made?
If a development is less than 10 years old [calculated from the date of the issue of the latest Temporary Occupation Permit (TOP) (or Certificate of Statutory Completion (CSC) if no TOP)], the owners of not less than 90% of the share values, share in land, or notional share in the land and not less than 90% of the total area of all lots (excluding the area of any accessory lot) or flats must agree in writing to sell all the units and common property or land to a purchaser under a sale and purchase agreement (subject to an order of the Strata Titles Board); and
[Sections 84A(1), 84D(2), 84E(3) and 84FA(2)]
If a development is 10 years old or more [calculated from the date of the issue of the latest TOP (or CSC if no TOP)], the owners of not less than 80% of the share values, share in land, or notional share in the land and not less than 80% of the total area of all lots (excluding the area of any accessory lot) or flats must agree in writing to sell all the units and common property or land to a purchaser under a sale and purchase agreement (subject to an order of the Strata Titles Board).
[Sections 84A(1), 84D(2), 84E(3) and 84FA(2)]
Note: The date of issue of the TOP or CSC may be obtained from the Building Plan Department, Building and Construction Authority at 5 Maxwell Road #16-00 Tower Block, MND Complex, Singapore 069110.
Q. what are the steps which the majority owners must take before submitting an application?
- The duly constituted collective sale committee must hold and conduct General Meetings pursuant to the Second Schedule in relation to the en bloc sale.
[The Second Schedule. Para. 2]
NOTE: The Second Schedule sets out the provisions that govern the conduct and proceedings of the General Meetings of the Management Corporations for the purposes of an en-bloc sale and the Third Schedule sets out the provisions that govern the composition, constitution and proceedings of a collective sales committee.
- Appoint not more than 3 owners from the collective sale committee to represent the majority owners in connection with the application.
[Section 84A (2)]
- Obtain a valuation report for the whole development from an independent valuer as at the date of the close of the public tender or auction.
[The Schedule. Para. 1(e)]
- Obtain a report by an independent valuer on the proposed method of distributing the sale proceeds.
[The Schedule. Para. 1(e)]
- Advertise the particulars of the proposed application in the local newspapers, as approved by the Board, in the 4 official languages.
[The Schedule. Para. 1(d)]
The advertisement must include:
- (a).information on the development ie name, land lot number and address;
- (b).brief details of the sale proposal;
- (c).the place at which the relevant parties can inspect the documents for the en-bloc sale; and
[The Schedule. Para. 3]
- Prepare the application to be made to the Board. A copy of the application form may be downloaded from this website. The form is also available at the office of the Strata Titles Boards at 45 Maxwell Road #01-11, East Wing, The URA Centre, Singapore 069118 (Tel: 6325 1585/6, Fax: 6325 1607).
- Serve a notice of the proposed application (“the notice”) to all the owners of the units by registered post and to the mortgagee, chargee or other person (other than a lessee) with an estate or interest in the unit and whose interest is notified on the land register for the unit by registered post.
[For the address of service by registered post, please see paragraph 9]
The notice must include a copy of:
- a. the advertisement referred to in paragraph 5 above;
- b. collective sale agreement
- c. the sale and purchase agreement;
- d.a statutory declaration made by the purchaser on his relationship, if any, to the unit owners;
- e. the valuation report referred to in paragraph 3 above;
- f. the report by an independent valuer on the proposed method of distributing the sale proceeds referred to in paragraph 4 above; and
[Section 84A(4), 84D(3) and 84E(5)
[The First Schedule. Para. 1(e)]
- Affix a copy of the notice, in the 4 official languages, to a conspicuous part of each building in the development.
[The First Schedule. Para. 1(e)]
- The notice to be served by registered post shall be served on a party:
- a. where the party is an owner of a unit registered under the Land Titles (Strata) Act, at the address as shown on the strata roll;
- b. where the party is an owner of a unit not registered under the Land Titles (Strata) Act, at the last recorded address at the Singapore Land Authority;
- c. where the party is a mortgagee, chargee or other person with an estate and interest in the unit whose interest is notified on the land register, at the address on the strata roll or last recorded address at the Singapore Land Authority; and
- d.where the party is a management corporation, at its address as shown in the Singapore Land Authority.
[The First Schedule. Para. 1(f)]
Q. what is the procedure for applying?
The application for en-bloc sale must be made using the approved form within 14 days of the publication of the advertisement. The application is to be made by way of a statutory declaration by the representatives appointed by the majority owners, stating that the relevant provisions of the Act have been complied with. The application is to be submitted at the office of the Strata Titles Boards,
The application must include the following:
45 Maxwell Road, #01-11
East Wing, The URA Centre,
Tel: 6325 1585/6
Fax: 6325 1607
- the documents set out in paragraph 7;
- a list of the names of the unit owners who have not agreed to the sale in writing, their mortgagees, chargees, the subsidiary proprietors in reversion of the leasehold estate in the lots and other persons (other than lessees) with an estate or interest in the flats whose interests are reflected in the land registers;[The First Schedule. Para. 4]
- such other documents that the Board may require; and[The First Schedule. Para.6]
- an undertaking to pay the costs of the Board in relation to any valuation or other reports called for by the Board.[Section 84A(3)]
6 copies of all documents mentioned above are to be submitted to the Strata Titles Boards.
Q. what other documents do the majority owners need to file?
After submitting the application at the Strata Titles Boards, the applicants must lodge a copy of the application, in the approved form, for registration at the Singapore Land Authority. A copy of the forms can be downloaded from the website of the Singapore Land Authority at http://www.sla.gov.sg
[The First Schedule. Para. 6]
Q. how can a minority owner or his mortgagee, chargee, etc, file an objection to the en-bloc sale application?
A unit owner who has not agreed to the sale in writing, his mortgagee, chargee or other person with an estate or interest in the unit may, within 21 days of the date of the notice for en-bloc sale, file an objection in the prescribed form (1 original & 5 photocopies) with the Strata Titles Boards.
[Sections 84(A)(4), 84D(3), 84E(5) and 84FA(2)]
The Board will, within 5 days of the filing of an objection, forward a copy of it by registered post to the representatives appointed by the majority owners and their lawyers, if any.
[The First Schedule. Para. 5]
Q. what are the factors which the board will take into account in deciding on an application?
- Where no objection is filed against the application
The Board will approve the application unless, after going through the application, it is satisfied that the transaction is not entered into in good faith, after taking into account:
- the sale price for the whole development;
- the method of distributing the sale proceeds; and
- the relationship of the purchaser to any of the flat owners.
The Board will not approve an application if the sale agreement requires any unit owner who has not agreed in writing to the sale to be a party to any arrangement for the redevelopment of the property or if the collective sale committee does not consent to any order made by the Board in relation to an increase in the sale proceeds to be received by the owners objecting to the sale (where it is just and equitable to do so in the opinion of the Board).
[Sections 84A(9), 84D(7), 84E(9) and 84FA (9)]
- Where objections are filed against the application
The Board will consider all the factors in paragraph 1 above and the objection and may call for mediation. The Board will not approve an application if it is satisfied that:
- the unit owner who objects to the sale will suffer a financial loss; or
- the sale proceeds to be received by a unit owner, his mortgagee or chargee, are insufficient to redeem any mortgage or charge against the flat.
Note 1: A unit owner will be considered to suffer financial loss if the sale proceeds for his unit, after any deduction (such as stamp duty and legal fees paid on purchase of the unit, privatization costs and costs incurred in the collective sale) allowed by the Board, are less than what he paid for the unit.
Note 2: A unit owner will not be considered to suffer financial loss because his net gain from the sale will be less than the other unit owners.
[Sections 84A(8), 84D(5), 84E(7) and 84FA(6)]
Note 3 : A unit owner will not be considered to suffer financial loss because the proceeds of sale for his unit, after such deductions as the Board may allow is less than the price he paid for his unit if he had purchased his unit after the collective sale committee had already signed an agreement to sell all the units and common property in the development to a purchaser
Q. what are the effects of an order of the board for en-bloc sale?
Owners of units and land
An order for en bloc sale issued by the Board is binding on all the unit and land owners of the development (including their successors in title and assigns), their mortgagees, chargees and persons with an estate or interest in the units and land (including lessees).
Under such an order, all the unit owners must sell their units (together with the land) to the purchaser in accordance with the sale and purchase agreement. They must produce the certificates of title and relevant title deeds to the representatives appointed by the majority owners for the purpose of the sale.
Owners of land in an application under section 84E where the unit owners of a 850 year registered leasehold estate do not own a share in the land where the Board makes an order for the en-bloc sale of the units and the land, the owner of the land (or eversion) will be deemed to have transferred his estate and interest to the land to the purchaser upon the registration by the Registrar of titles of the transfers of all the units in the development and the Registrar of titles shall enter a notification of the vesting of the land in the purchaser on the land register.
Owners of a registered leasehold in an application under section 84FA where the unit owners own the registered leasehold tenure of at least 850 years or other tenure where the Board makes an order for the en-bloc sale of the units and the common property in the strata title plan, the unit owner in reversion of the leasehold estate will be deemed to have transferred his estate and interest in the unit to the purchaser upon the registration by the Registrar of Titles of the transfers of all the units in the strata title plan and the Registrar of Titles shall enter a notification of the vesting of the reversionary interest in the purchaser on the subsidiary strata land register.
Effect on leases of the units
A lease against any of the units (other than the lease held by the unit owner) shall, unless there is an earlier agreed date, determine on the date on which vacant possession is required to be given to the purchaser.
Q. can the majority owners apply to the board to appoint a third party to act for certain unit owners in the sale?
The representatives appointed by the majority owners may apply to the Board to appoint a person to deal with all matters pertaining to the sale of a flat where:
- the unit owner has died and no personal representative has been appointed; or
- in any other case as the Board may think fit.
Q. who can appear in a hearing before the board?
Where a Board has appointed a date for hearing, it will, where necessary, give to all parties to the dispute or matter a notice of the hearing.
A party entitled to appear before the Board may appear in person or may be represented by his lawyer or such other person as the Board may allow and who may examine witnesses and address the Board on behalf of the party.
According to The Companies Act Cap 50, every company must appoint an auditor within 3 months from the date of incorporation.
|PRIVATE Submission of Estimated Chargeable Income (ECI)||Within 3 months from financial year end|
|Submission of Forms B, B1, P for current Year of Assessment||By 15th April / current year|
|Submission of Form C for current Year of Assessment||By 31st July / current year|
|Section 171 – PRIVATE Appointment of Corporate Secretary||Within 6 months from date of incorporation|
|Section 175 – First Annual General Meeting (AGM)||Within 18 months from date of incorporation|
|Section 175 – AGM & Annual ReturnSection 201 – Financial Reports||Once in every calendar year and not more than 15 months from the last AGMAnd not more than 6 months from the accounting year end|
|Section 197 – Filing of Annual Return (AR) and audited accounts with the ACRA||Within one month from the AGM date|
Q. Must my accounting staff be qualified ?
It is not a mandatory requirement for accounting staff to be qualified. However, for established companies, it is a good practice to hire qualified accountants so that the accounting standards can be maintained.
Q. Who are responsible for the accuracy of my company’s accounting records ?
All directors of the company are responsible for the records, regardless of whether they are involved in the operations or otherwise.
Q. Can my accounting records be kept manually ?
Yes, there is no mandatory requirement for accounting records to be computerised.
Q. If my company’s paid up share capital is $50,000, must I maintain this amount in the bank ?
It is not necessary to maintain the full amount of your paid-up capital in your bank.
Q. How long do I have to keep my accounting records ?
Under section 1989 (2) of the Companies Act, all accounting documents must be retained for a minimum of five (5) years.
Q. What will happen if my accounting records are incomplete ?
The auditors will usually qualify the audit report; this means that they will report to the shareholders that the accounting records are incomplete. If the impact of the missing records is material (most records cannot be found), the auditor will state that they cannot express an opinion on whether the accounts presents a true and fair view of the financial position of the company.
For tax purposes, the IRAS may query the company on why the accounting records are incomplete. In addition, IRAS may discretionarily charge an estimated tax amount on the company in a manner that they see fit, under the circumstances.
Q. Can I change the accounting year-end of my company ?
Yes, you are able to change the accounting year-end, but it must be approved and resolved at a director’s meeting.
Q. What is the deadline for submission of income taxes ?
Under the Income Tax Act, all companies are required to submit their income tax return (Form C) together with audit accounts / unaudited accounts (for companies qualifying for an audit exemption under Companies Act) and tax computation with supporting schedules by 30 November of the following year, regardless of when their accounting period ends. For example, if the year-end is 31 January 2012, the deadline is 30 November 2013. If the year ended is 31st December 2012, the deadline will also be 30 November 2013.
There is no extension applicable and penalty on late submission is chargeable.
Q. What is ECI / Who needs to file ECI ?
ECI means Estimated Chargeable Income. It is an estimate of a company’s chargeable income for the year. Under the Income Tax Act, all companies are required to submit their estimated chargeable income (ECI) within three months after their financial year-end. Usually, tax agents will assist companies in submitting this through e-filing. If your company has suffered a loss, an ECI submission with “NIL” amount is still required.
If you do not submit within the stipulated time, IRAS may raise an estimated tax amount at their own discretion.
Q. When do I have to pay the tax after IRAS has made a tax assessment of my company ?
You have to pay the tax within 30 days from the date on the Notice of Assessment, issued by IRAS. Even if you do not agree with the amount charged by IRAS, you are still required to pay the tax due by due date AND make an appeal in writing within 30days upon receipt of the assessment. If the payment is not received within 30 days, IRAS will charge late payment penalty on the unpaid tax amount at 5%, and subsequently, at 1% every month up to a maximum of 12%.
Q. What is the current corporate tax rate ?
The current corporate tax rate is at 17% with effect from YA 2010. Effective from YA 2008, a partial tax exemption is given to companies on normal chargeable income* (excluding Singapore franked dividends) of up to $300,000 as follows: Exempt amount First $ 10,000 @ 75% = $ 7,500 Next $ 90,000 @ 50% = $45,000 Total $100,000 = $52,500 Effective from YA 2008, the full tax exemption for new start-up companies on chargeable income of up to $300,000 is as follows: Exempt amount
First $100,000 @ 100% = $100,000 Next $200,000 @ 50% = $100,000 Total $300,000 = $200,000
Q. If my company has approved directors’ fees (not salary), when should the directors’ report their fees in their income tax return ?
Directors’ fees can only be approved at a general meeting. This means that the date of the general meeting determines when the directors have to report directors’ fees as their income. For example, if directors’ fees for 2010 are approved at the general meeting in May 2011, then the directors have to report income for the year 2011 (Year of Assessment 2012). This is regardless of whether the fees have been paid or not.
However, the treatment for director’s salary (and CPF) is different from the above. The directors have to report salary on a calendar basis, i.e. 1 January to 31 December every year. End of the calendar year, the company has to issue the form, IR8A to the directors for their salary earned during the calendar year.