Voluntary Disclosure Program (VDP)

The Voluntary Disclosure Program (VDP) by the IRAS offers taxpayers an opportunity to voluntarily disclose past tax errors. This program encourages individuals and businesses to rectify mistakes in their tax filings without facing severe penalties. By taking advantage of the VDP, taxpayers can maintain compliance with Singapore’s tax regulations while minimizing financial and reputational risks. This guide provides an overview of the VDP, its benefits, eligibility criteria, and the disclosure process.

What is the IRAS Voluntary Disclosure Program (VDP)?

The VDP is an initiative by IRAS to promote voluntary compliance among taxpayers. It allows taxpayers to correct errors or omissions in their past tax filings without being subjected to heavy penalties, provided the disclosure is made in good faith and within the stipulated time frame.

Benefits of the Voluntary Disclosure Program

1. Reduced Penalties
   • Immediate Disclosure: Disclosures made within the grace period (typically within one year of the filing due date) will face no penalties.
   • Beyond the Grace Period: Penalties may be reduced significantly for disclosures made after the grace period.
2. Avoidance of Legal Action
   • Voluntary disclosure helps taxpayers avoid prosecution for intentional tax evasion or fraud.
3. Enhanced Transparency
   • Demonstrates a commitment to compliance and good corporate governance.
4. Improved Relationship with IRAS
   • Building trust with IRAS can reduce the likelihood of future audits or investigations.

Eligibility for the Voluntary Disclosure Program

The VDP is available to:

1. Individuals and Businesses
   • Covers all taxpayers, including individuals, sole proprietors, partnerships, and companies.
2. All Tax Types
   • Includes Corporate Income Tax, Personal Income Tax, Goods and Services Tax (GST), and Withholding Tax.
3. Errors Made in Good Faith
   • The program applies to genuine errors or omissions and excludes cases of deliberate tax evasion.
4. Disclosures Not Triggered by Audit
   • Taxpayers must disclose errors before being notified of an audit or investigation by IRAS.

Common Errors Covered by the VDP

The VDP applies to a wide range of tax errors, including but not limited to:

• Incorrect income declarations.
• Omissions of income or expenses.
• Errors in claiming deductions or tax reliefs.
• Misreporting of GST inputs or outputs.
• Under-declaration of withholding tax.

How to Make a Voluntary Disclosure

1. Identify the Errors
   • Conduct an internal review to identify errors or omissions in past tax filings.
2. Prepare Supporting Documentation
   • Gather relevant documents, such as financial statements, tax computations, invoices, and contracts.
3. Submit a Disclosure to IRAS
   • Log in to the myTax Portal using your CorpPass or Singpass.
   • Use the appropriate e-Service to submit the disclosure, specifying the nature and extent of the error.
4. Pay Additional Taxes
   • IRAS will issue a revised Notice of Assessment (NOA) reflecting the additional taxes payable.
   • Make the payment promptly to avoid further interest charges.

Important Considerations

1. Timeliness: Early disclosure reduces penalties significantly or eliminates them altogether if within the grace period.
2. Accuracy: Ensure the disclosure is complete and accurate to avoid additional scrutiny.
3. Engage Professional Help: Seek advice from tax professionals to ensure a thorough review of past filings and accurate reporting of errors.

Consequences of Non-Compliance

Failing to disclose errors voluntarily can result in:

• Higher Penalties: Penalties of up to 200% of the tax undercharged.
• Interest Charges: Accrual of interest on unpaid taxes.
• Legal Action: Risk of prosecution for intentional tax evasion.

How Apexia Corporate Advisory Can Help

Navigating the Voluntary Disclosure Program can be complex, especially for businesses with multiple tax obligations. At Apexia Corporate Advisory, we offer:

1. Tax Compliance Reviews: Conduct a comprehensive review of past tax filings to identify errors.
2. VDP Advisory Services: Provide guidance on eligibility, required documentation, and the disclosure process.
3. Submission Support: Assist with preparing and submitting accurate disclosures to IRAS.
4. Tax Planning: Implement strategies to ensure ongoing compliance and minimize future tax risks.

Let us help you navigate the VDP and maintain compliance with IRAS.