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Filing Income Tax as Financial Advisors in Singapore

Six insurance agents in Singapore have been found guilty of tax evasion. The court determined that they had submitted false business expenses to collectively reduce their income taxes by nearly SG$100,000.

These agents, who were previously employed by Great Eastern Financial Advisers, all confessed to the charge of making fraudulent entries to evade taxes. The Inland Revenue Authority of Singapore (IRAS) initiated the legal proceedings against these insurance agents. The tax authority revealed that for the 2018 and 2019 tax assessment years, these six individuals had inaccurately reported business expenses totaling around SG$600,000 in their income tax returns, classifying them as “general expenses” and “commissions paid to introduced.” If you work as a financial advisor in Singapore, it is essential to be aware of the following key points when it comes to filing your personal income taxes with the Inland Revenue Authority of Singapore (IRAS):

  • Income Tax: Your income as an insurance agent will be subject to income tax. The tax rate depends on your income bracket. For example, if your income is less than SGD 20,000 per year, you are not required to pay income tax.
  • Declaration of Income: You are required to declare all sources of income, including commission, bonuses, incentives, and any other income that you receive as an insurance agent.
  • Deductions: You may be eligible for deductions such as expenses incurred in the course of your work as an insurance agent, including transportation, training, and office supplies.’
  • Filing Deadlines: Tax returns must be filed by April 15th for the previous year’s income. You can file your tax returns online through the IRAS website, or manually by submitting the paper form.
  • Payment of Taxes: If you owe taxes, you must pay them by the filing deadline. If you fail to pay on time, you may be subject to penalties and interest charges.

It’s important to keep accurate records of all your income and expenses throughout the year so that you can file your taxes accurately and on time.

Understanding the Tax System for Financial Advisors

Gaining a grasp of the Singaporean tax system constitutes the initial stride towards effectively managing your tax obligations as a financial advisor, as you’re responsible for filing your own income tax returns. In Singapore, individuals are subject to progressive tax rates that span from 0% to 22%, contingent upon their income levels. As a financial advisor, you fall into the category of self-employed individuals and must diligently report both your income and expenditures on your tax declaration.

To ensure precise income reporting, it is crucial to maintain a comprehensive record of all earnings accrued throughout the year. This encompasses not only compensation received for your financial advisory services but also any other income sources, such as rental properties or investments. Keeping meticulous records of all incoming funds will avert any discrepancies when the time comes to file your taxes.

In addition to income tracking, financial advisors should meticulously document business-related expenses. These may encompass equipment acquisitions, software subscriptions, marketing outlays, and, if applicable, home office expenses. By adeptly recording these expenditures, you may potentially reduce your taxable income and diminish your overall tax liability.

Although it is plausible to navigate the Singaporean tax system independently as a financial advisor, ponder engaging a tax professional if you harbor uncertainties or confront intricate financial scenarios. A qualified expert can furnish tailored counsel tailored to your particular circumstances and guarantee that you leverage all available deductions and credits.

Tax regulations in Singapore are subject to perpetual change. Consequently, it’s imperative for financial advisors to remain abreast of any novel statutes or prerequisites that could impact them. Stay well-informed by routinely monitoring government websites or consulting with a tax advisor specializing in self-employment taxes.

By grasping the intricacies of taxation in Singapore as a financial advisor, maintaining organized records of income and expenses, and staying apprised of current regulations, the process of filing taxes will become notably more straightforward. Armed with these indispensable insights, let’s confidently address those freelance tax obligations!

Strategies for Reducing Income Tax Legally

In Singapore, there are various avenues to minimize your income tax liability through tax relief. As a Singapore tax resident, you can ascertain your eligibility for these schemes by using the IRAS personal relief checker. It’s important to note that the income tax relief is capped at S$80,000, and certain reliefs are automatically factored in when filing your taxes. Here are some of the prevalent tax reliefs that can help you reduce your income tax burden:

  1. Donations: By contributing to registered tax-deductible charities like the Community Chest or approved Institutions of a Public Character, you can avail of tax deductions of 2.5 times the qualifying donation amount. Notably, donations need not be limited to cash; other forms such as shares, computers, artifacts, land, and buildings can also qualify for tax relief.
  2. CPF-Related Top-Ups: Tax reliefs can be realized by voluntarily topping up your own or family members’ CPF Special Account (SA), making voluntary contributions to your Medisave account (if you haven’t reached the Basic Healthcare Sum), and contributing to your Supplementary Retirement Scheme (SRS) account. These top-ups not only bolster your retirement savings but also reduce your taxable income.
    • Family-Related Relief: For those providing for family members, several tax reliefs can alleviate financial obligations.
    • Spouse Relief/Handicapped Spouse Relief: Offered to taxpayers supporting their spouse or handicapped spouse, providing tax relief of S$2,000 or S$5,500, respectively.
    • Parent Relief/Handicapped Parent Relief: Applicable to individuals supporting parents, grandparents, parents-in-law, or grandparents-in-law in Singapore. Relief amounts vary based on whether the taxpayer resides with the dependant.
    • Handicapped Brother/Sister Relief: For those supporting handicapped siblings or siblings-in-law, each can be claimed for a tax relief of S$5,500.
    • Grandparent Caregiver Relief: Available for working mothers with parents, grandparents, parents-in-law, or grandparents-in-law (including ex-spouses’) looking after their children, with a maximum relief of S$3,000.
    • Qualifying Child Relief (QCR)/Handicapped Child Relief (HCR): Recognizes parents’ efforts in raising their children, with relief amounts varying for non-handicapped and handicapped children.
    • Working Mother’s Child Relief (WMCR): Provided to encourage married women to remain in the workforce after having children. The relief amount is now based on the number of children and is transitioning from a percentage-based to a fixed-sum relief.g)
    • Foreign Domestic Worker Levy (FDWL) Relief: Allows married women to claim twice the previous year’s total FDWL paid for one foreign domestic worker.
    • National Servicemen (NSmen) Relief: Operationally ready NSmen are entitled to NSman tax relief, with relief amounts based on the national service performed in the preceding year. Spouses and parents of NSmen are also eligible for tax reliefs.
    • Life Insurance Relief: Eligible if you’ve paid annual premiums for your own life insurance policies, particularly if your total CPF contribution is less than S$5,000 in the previous year (excluding voluntary cash contributions to your Medisave account).
    • Course Fee Relief: Encourages skills upgrading by allowing individuals to claim actual course fees, up to a maximum of S$5,500 each year, if the course aims to gain an approved academic, professional, or vocational qualification.
    • Earned Income Relief: Intended for gainfully employed individuals or those engaged in trade, business, profession, or vocation. The maximum relief varies with age and handicapped status.

By strategically leveraging these tax reliefs, you can effectively reduce your income tax liability in Singapore. However, it’s advisable to stay informed about any changes in tax regulations and consult with tax professionals to ensure optimal tax planning.

Tax Fraud

Tax fraud is a serious offense in Singapore, and insurance agents are not exempt from the consequences of committing such fraud. Here are some common examples of tax fraud in the insurance industry in Singapore:

Underreporting of Income: Insurance agents may underreport their income to avoid paying taxes. This can be done by failing to declare commission or other income earned from their work as agents.
Overstating of Expenses: Some insurance agents may also claim excessive expenses to reduce their taxable income. This can be done by inflating expenses such as transportation, training, and office supplies.
False Tax Claims: Some insurance agents may make false claims for tax deductions or reliefs to reduce their tax liability. This can include claiming for expenses that are not related to their work as agents, or claiming reliefs for family members who are not eligible.
Unreported Foreign Income: Insurance agents who have income earned overseas must also declare that income to the IRAS. Failure to declare such income can lead to serious tax penalties and consequences.

If an insurance agent is found to have committed tax fraud, they may face heavy fines, penalties, and even criminal charges. In addition, their professional license may be revoked, which can result in the loss of their livelihood. It is important for insurance agents to comply with the tax laws and regulations in Singapore and to seek professional advice if they have any questions or concerns about their tax obligations.

Recent Tax Fraud Cases in Singapore

There have been several reported cases of insurance agents in Singapore committing tax fraud. For example, in 2022, Six former insurance agents who were previously employed by Great Eastern Financial Advisers in Singapore have been found guilty of tax evasion. The agents pleaded guilty to falsifying business expenses in order to collectively reduce their income taxes by nearly SG$ 100,000. Each of the agents received different jail sentences and fines, depending on the amount of taxes evaded. Yvonne Quah received an eight-week sentence and a fine of SG$113,839, while Jackie Tang Hong Kong was jailed for four days and ordered to pay SG$8,465.

The Inland Revenue Authority of Singapore (IRAS) brought the charges against the agents, stating that for the 2018 and 2019 tax assessment years, the agents reported business expenses of around SG$600,000 in their income tax returns as “general expenses” and “commissions paid to introducers”. However, IRAS found that the agents did not pay any “introducer fees” nor received any services from the purported introducers.

IRAS stated that the agents did not keep supporting records for their income and allowable deductions, which is considered a violation of the Income Tax Act.

In addition to facing legal penalties, the six agents faced professional sanctions from the Monetary Authority of Singapore after IRAS handed over the case to the financial regulator.

In Conclusion

Understanding the intricacies of personal income tax for insurance agents in Singapore is paramount for both compliance and financial planning. The availability of various tax reliefs and deductions provides opportunities to optimize one’s tax position, but it necessitates meticulous record-keeping and knowledge of eligibility criteria. By staying informed about evolving tax laws and consulting with tax professionals when needed, insurance agents can navigate the Singaporean tax landscape effectively, minimize their tax liabilities, and secure a sound financial future. This proactive approach not only benefits individual agents but also contributes to the overall integrity of the tax system in Singapore.

Don’t let the complexities of taxation hinder your financial goals. Partner with us, and together, we’ll navigate the tax landscape with confidence, ensuring you maximize your earnings and secure your financial future.

Ready to take control of your financial destiny? Contact us today, and let’s embark on a journey to financial prosperity together!

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