Sector, uses and review findings
The sector covers new and used dealers, authorised distributors, retailers, agents and parallel importers. Uses include customer/journalist test drives, showroom or marketing displays, event sponsorship, courtesy cars during servicing and management cars for staff or directors’ business/private use. IRAS reviewed 18 companies with desk reviews and arranged visits, recovering S$1.4 million in taxes and penalties.
Four recurring errors
Related sale, repair and financing entities did not always transact at market value, contrary to arm’s-length pricing. General inventory or contingent expense provisions without definite legal liability were wrongly deducted. Director/family prayer costs, private-car petrol and family medical costs were private expenses. Unsupported travel or entertainment reimbursements lacked evidence of existence and validity; invoices, records, economic substance and commercial justification are needed.
Registered new cars: all three inventory conditions
Inventory treatment applies to unregistered new cars. Each registered new car must be registered solely to facilitate customer or journalist test drives; actually used only for test drives, display or one-time marketing-event participation, supported by records; and held for at most two years from registration. If any test fails in a YA basis period, that YA’s expenses are not deductible and disposal gains or losses not taxable or deductible. Where inventory treatment applies, expenses are deductible and disposal results taxable or deductible.
Used cars and business-use cars
Used cars previously registered to and driven by another owner qualify as inventory when acquired for resale. Test-drive and display expenses qualify; other uses such as employee private use do not, though resale disposal gains/losses remain taxable/deductible. Registered management, courtesy and cars held beyond two years follow business-use treatment: expenses not deductible and disposal gains/losses not taxable/deductible, consistent with other industries.
Framework date and usage templates
The framework was shared with SVTA, AIEA and MTA on 3 September 2020, effective YA 2021. Earlier claims may be accepted with evidence. For registered new cars used beyond test drive/display/one-time event, track uses and expenses from registration to test each YA. For used resale cars used beyond test drive/display, track expenses to identify add-backs. New-car template exceptions: unregistered cars, registered cars used only for permitted inventory purposes, and cars bought as courtesy or management cars. Used-car exceptions: resale with only test/display, and courtesy/management business-use purchases. Other record systems are allowed with controls and ability to supply the template-format details.
Disclosure and penalties in this source
Section 95 can impose up to twice undercharged tax for negligent or unreasonably incorrect returns; serious cases may be prosecuted. The source’s Voluntary Disclosure Programme offers penalty waiver for qualifying disclosure within one year of the 30 November statutory filing date, and reduced 5% per annum after that grace period. These are conditional provisions, not an automatic waiver.
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 ↗