Definition and 2022 findings
Family control includes majority ownership with active or passive control and minority holdings with effective control by spouses, parents, children or siblings. By 2022 IRAS had completed 816 audits; 44% of those audited companies had errors, recovering approximately S$16.7 million tax and over S$3 million penalties. Questionnaires and pre-audit self-review encouraged revised computations. The sample figures are not a rate for every family company.
Checks 1–3: capital costs, cars and schemes
Section 15(1)(c) disallows ordinary deductions for capital share-issue/dividend costs, fixed-asset acquisition and accounting depreciation. Section 15(1)(k) disallows private S-plated-car petrol, insurance, repairs, parking and ERP even on business trips. Sections 19/19A machinery/plant allowances do not automatically cover floor tiles, sanitary fittings or false ceilings: this source points to conditional section 14N renovation relief. Enhanced schemes have eligible-spend conditions and ceilings.
Checks 4–6: insurance, private expenses and family pay
Director life policies pledged as bank trade-facility collateral with the bank beneficiary did not satisfy keyman premium conditions. Separate private entertainment, subscriptions, insurance and travel rather than assume immateriality. Family remuneration must reflect work actually done and independent-employee pay for similar qualifications and experience. Pay to parents, spouses, children or siblings not working, or excess over real services, is not deductible.
Check 7: non-income-producing assets
Interest on vacant investment property, non-dividend-yielding shares/securities, interest-free non-trade/sundry debtor balances, or related-company/shareholder non-trade loans requires adjustment. The total asset method normally calculates disallowed interest = cost of non-income-producing assets ÷ cost of total assets × interest expense, based on total funds financing all assets.
Checks 8–10: CPF, medical expenses and IR8A
Excess voluntary CPF contributions are not deductible. The source caps medical expenses at 1% of total remuneration, or 2% for qualifying PMBS/TMIS implementations. Remuneration includes salaries, allowances, bonuses, director remuneration excluding director fees, and allowable CPF. Incorrect caps remain disallowed even for business costs. Director commissions and other payments must also appear in IR8A.
Checks 11–13: completeness, evidence and related fees
Reconcile sums and every issued invoice to avoid income understatement. Avoid double-counted purchases and unsupported estimates. Related consultancy, management or royalty charges need actual services and substance; IRAS found recipient companies with only statutory expenses and income sized merely to consume exemption, common directors, address and tax agent.
Checks 14–15: property and cessation
Short ownership, inability to finance long holding and active buyer searches supported taxable property trading despite an investment label. Document purchase intention and sale circumstances contemporaneously with board minutes, resolutions, feasibility studies and loan agreements. Post-cessation dormant-business costs were not income-producing deductions in the source. Maintain records supporting every declaration, both for compliance and fraud/loss control.
Disclosure and consequences
The publication’s qualifying VDP grace period was one year from 30 November; later qualifying disclosure carried reduced 5% per annum. Section 95 incorrect returns could attract twice undercharged tax and prosecution in severe cases. The fifteen checks and older section numbering describe this audit source and do not replace checking subsequent legislation.
Official source
This article independently explains the substantive contents of the official PDF, including the relevant conditions, procedures and annexes. The linked document remains the authoritative source for its original wording, and later changes should be checked separately.
Read the official PDF ↗