Summary: Tax audits and investigations by IRAS vary in scope, from routine reviews to full-scale investigations or dawn raids in serious cases. Receiving an audit notice does not imply wrongdoing, but timely and professional handling is crucial. Businesses should stay organised, cooperate with IRAS officers, and seek expert tax advice early to manage risks effectively. Implementing strong tax governance, maintaining accurate records, and making voluntary disclosures can help minimise the likelihood of audits and ensure compliance with Singapore’s tax laws.

The scope and extent of an audit examination by Inland Revenue Authority of Singapore (“IRAS”) vary for different selected businesses or targets. It may be a straightforward request via email or letter correspondence to the target for additional information and documents or seeking clarification. A more serious case would involve a pre-arranged meeting with the target at its corporate office to allow IRAS auditors to conduct a thorough examination of transactions, and inspection of documents and accounting records. For a much more serious inquiry into a target’s financial affairs or where there are indications of potential fraud, tax evasion or significant discrepancies in reported income, an unannounced surprise dawn raid may be conducted by IRAS investigators at the residences of the individuals involved and/or business office.    

Receiving a notice from IRAS about an impending tax audit or investigation and experiencing a dawn raid can be daunting and stressful. The proceedings that ensue could disrupt business operations and may carry significant financial and reputational consequences.

A tax audit or investigation does not automatically imply any wrongdoing. That said, when IRAS initiates an investigation, it is usually based on strong prima facie evidence that suggests potential non-compliance. How you respond to the actions taken by IRAS could have a major impact on the outcome. Taking the right steps early helps you manage the process effectively and mitigate potential risks. 
 

A field audit visit to your office

When IRAS requests a field audit, it means that they plan to conduct an on-site review or audit of your financial records. Here is how you could prepare for such a request. 
 

• Advance preparation
  
  Review the audit notice received to understand the scope and period under review. Organise the relevant documents IRAS requested such as the financial statements, income tax computations, invoices, general ledger, etc. for the relevant years in question.
   
• Designate a point of contact
  
  Identify a responsible person (e.g. finance manager, accountant or tax agent) who is more familiar with the accounts to liaise with IRAS tax auditors during their visit so that all queries can be channelled to one single point of contact rather than directed randomly to various employees of the company.  
   
• Cooperate professionally
  
  Respond to questions raised accurately and promptly. Facilitate access to the relevant personnel, systems and documents. If necessary, you can request for extension of time to furnish the information or documentation requested.
   
• Seek professional guidance
  
  Engage your tax advisor or legal counsel early to support you throughout the entire audit process and address any technical issues raised. 
   

Reacting to a surprised dawn raid 

A surprised raid by IRAS Tax Investigators usually happens in the early hours of the day. Such an unexpected visit often catches the individuals concerned unprepared at home. Simultaneous raids may also be conducted at the auditor’s or tax agent’s office, or even the homes of related parties.

Some practical tips to observe and lessen your anxiety when IRAS Tax Investigators show up on your doorstep.
 

• Stay calm
  • Remain calm and polite. Avoid panic or confrontation.
  • Politely request to verify the officers’ identity and their official authorisation letter to confirm their credentials.
  • Take note of the names, designations and number of IRAS officers (Tax Investigators and Forensic Officers) present.
  • Advise your auditor, tax agent and related parties to give their full cooperation.
     
• Contact your tax advisor or legal counsel immediately
  • Inform your tax advisor or legal counsel immediately. Their presence is key to ensuring your rights are protected and they can guide you through with your responses to the issues raised.
  • Politely inform IRAS Tax Investigators that your advisors are on their way to assist.
     
• Provide full cooperation but know your rights
  • Do not attempt to delay or obstruct IRAS officers from performing their duties as this may lead to legal consequences.
  • Allow IRAS officers access to your premises, systems and documents.
  • Avoid making unprepared or misleading statements. You could request to defer answering complex questions until you have verified the full facts or recalled a particular event asked.
  • Ask for a list of items seized and copies of any records taken.
  • You may request to have your breakfast and take your medication before accompanying   IRAS officers back to their office for an interview. 
     
• Do not tamper with physical or electronic records and documents
  • Do not delete, hide or alter any physical or electronic documents from computers, mobile phones etc. Doing so may result in serious legal consequences.
  • Do not make false statements. 
     
• Take notes during IRAS visit and interview
  • Record which documents were reviewed or taken, the questions asked by IRAS officers and any instructions given.
  • Review the acknowledgement letters carefully before signing them and retain a copy.
  • Allow IRAS officers to do the cash count or record your luxury goods on hand in your presence or in the presence of your authorised person. However, they cannot confiscate your cash or luxury goods.
     
• Conduct an internal review promptly
  • Engage a tax advisor or legal counsel as soon as possible so that they can guide you through the entire process of the tax investigation from the outset.
  • Commence an internal assessment or review to understand the potential areas of non-compliance and tax exposures. Make full disclosure to your tax advisor or legal counsel for better advice.

An interview session with IRAS officers 

IRAS may invite you for an interview during the day of the audit or raid to gather further information. There may be more than one such interview session during the entire audit/investigation process if additional clarifications or documents are needed.   
 

• Purpose of the interview
  
  IRAS officers will clarify the purpose of the meeting and outline the tax matters under review, the types of tax under audit/investigation and the Year(s) of Assessment involved. The main purpose of the interview is to gather information and evidence to assist in their audit/investigation. You should ask for this information if IRAS tax officers did not provide it.
   
• Format and conduct
  
  The interview is usually conducted at IRAS office. The session is formal. Your statement will usually be recorded during the investigation interview and you will be asked to read and sign a written statement after the interview.
   
• Capacity and role of an interviewee
  
  You may be interviewed in your capacity as taxpayer, spouse, business owner, director, employee or related party.
   
• What are your rights during the interview
  
  You possess the following rights.  
  • Request the presence of a professional representative such as a tax advisor or legal counsel if the IRAS officer is not recording a statement.
  • Clarify issues that you do not understand, request a detailed examination of the document presented and defer your answers to the questions raised if you are unsure and cannot recall and need to check your records.
  • Request an official interpreter if you have difficulty understanding or communicating with the IRAS officer(s).
  • Add or make any alterations to your statement if it is not factually stated. You should initial and date each alteration.
  • While you will not be provided a copy of your statement, you are allowed to take notes of what you have provided to the IRAS officer(s) in your statement and any additional information you need to provide following the meeting.
  • Request a short break for drinks or meals if needed.
  • Do not continue with the statement recording if you are unwell or have taken medication before the interview as this may impair your thought process and thinking ability.
     

Minimising risk of a tax audit or investigation

Consider adopting the following best practices and proactive measures to significantly reduce the risk of a tax audit or tax investigation. 

Once the tax audit or investigation is concluded, the process does not end there. It is important to carefully manage the follow-up actions to ensure full compliance and minimise future risks.

Get in touch with one of our specialists to learn more about our Tax Dispute Resolution Services.

Koh Puay Hoon Partner & Head of Tax +65 6594 7820 [email protected]

Andrew Tan Senior Director, Dispute Resolution +65 6594 7859 [email protected]

Jamie Chuah Senior Manager, Dispute Resolution +65 6594 7318 [email protected]