What records must I keep for tax purposes?

Keeping accurate and comprehensive records is crucial for tax compliance and to support the information provided in your tax returns. Here are the types of records you must keep for tax purposes:

Types of Records to Keep

Financial Records:

Income Records:

• Sales invoices and receipts

• Bank statements showing deposits

• Records of any other income sources (e.g., rental income, investment income)

Expense Records:

• Purchase invoices and receipts

• Bank statements showing payments

• Records of salaries and wages paid

• Utility bills and other operating expenses

Bank Statements:

• Bank statements are essential as they provide a record of all financial transactions, including income and expenses.

Credit Card Statements:

• Statements showing business-related purchases and expenses.

Accounting Records:

• General ledgers and journals

• Trial balances

• Balance sheets and profit and loss statements

Supporting Documents:

• Contracts and agreements (e.g., leases, loan agreements)

• Receipts for charitable donations

• Details of any tax-related elections or claims

Payroll Records:

• Employee details (e.g., names, addresses, identification numbers)

• Records of salaries, wages, bonuses, and other compensation

• CPF (Central Provident Fund) contributions and deductions

Inventory Records:

• Inventory purchase and sale records

• Stocktaking reports

Tax Documents:

• Copies of filed tax returns and any related correspondence with tax authorities

• Notices of assessment and other tax documents received from IRAS

Duration for Keeping Records

In Singapore, the Inland Revenue Authority of Singapore (IRAS) requires businesses to keep their records for a minimum of five years from the end of the relevant accounting period. This applies to both income tax and GST (Goods and Services Tax) records.

Using Bank Statements

Yes, bank statements are a vital component of the financial records you must keep. They provide a detailed record of your business’s financial transactions, helping to verify income and expenditure. However, bank statements alone are not sufficient. They should be supplemented with other supporting documents such as invoices, receipts, and contracts to provide a complete and accurate record.

Best Practices for Record-Keeping

Organize Records:

• Keep records organized by category (e.g., income, expenses, payroll) and chronological order.

• Use software tools for digital record-keeping and ensure they are backed up regularly.

Maintain Accuracy:

• Ensure all records are accurate, complete, and up-to-date.

• Regularly reconcile bank statements with your accounting records.

Store Securely:

• Store records securely to prevent loss or damage.

• For digital records, ensure proper cybersecurity measures are in place.

Regular Review:

• Periodically review your records to ensure compliance and identify any discrepancies early.
  

By keeping thorough and well-organized records, you can ensure compliance with tax regulations, facilitate the preparation of accurate tax returns, and be prepared for any potential audits or inquiries from IRAS.