• Posted by admin
• 12 February 2018
• Articles, Company Secretarial

Singapore's sole proprietorship means that one person or one company owns a business. The business can have no partners, and the owner has the ultimate say in the complete running of the business.

The sole proprietorship can have its own name so long as the name isn't:

• Restricted
• Reserved
• Identical to another entity
• Undesirable

Sole proprietorship requires that the owner of the business notify the Registrar of the following:

• The business' principal place of business
• Any place where business is performed

Homeowners can even be allowed to conduct small-scale operations in residential premises. This is where the question of whether or not a foreigner can register a sole proprietorship occurs.

Can a Foreigner Register as a Sole Proprietorship in Singapore?

Singapore, unlike many other countries, does allow foreigners to register a sole proprietorship within the country. There are certain rules and regulations that must be met for a foreigner to legally have a sole proprietorship:

• A local resident must be appointed as an authorized representative of the company.
• The manager, who is a resident of Singapore, must be at least 21 years of age.

This is the key most important thing for all foreigners that want to own their own business in Singapore. The local resident will remain an authorized representative, while the owner resides outside of Singapore.

In the event that the owner does reside within the country in the future, the local representative can be removed by the company.

Foreigners can also opt to reside in Singapore and open their business. This is a very stringent process, and as such, it's recommended that all owners who want to manage their company's operations and be present in Singapore seek approval from the MOM first.

How to Register a Sole Proprietorship

Singapore uses the BizFile system for all business registrations. An application must be sent through the electronic filing and information retrieval system to be properly filed. Before registration can occur, there is some preparation that must take place.

The preparation which is required is only valid for citizens or permanent residents in Singapore.

Foreigners will not need to conduct this preparation, which includes:

• Topping off Medisave accounts

Business owners, or potential business owners that want to register their business, have one of two main options to do so:

1. BizFile. The BizFile system requires the register to have a SingPass or CorpPass. The owner will be required to provide an application with their endorsed consent via the BizFile system.

2. Registered Filing Agent. A registered agent can include a corporate secretarial firm, accounting firm or law firm. The agent will submit and complete the online application on behalf of the owner. This option will provide the guidance of a professional with experience registering a business in Singapore. This is an optimal choice for ensuring that all of the requirements to start a business are met and the paperwork is approved.

Business registration will require a fee that is subject to change. Fees, at the time of writing this article, are:

• $15 for a name application fee
• $100 for a 1-year business registration
• $160 for a 3-year business registration

Singapore's system is very quick, and a business may be registered as quickly as 15 minutes after the registration fee is paid. There are circumstances where the registration can take 14 days to 60 days to complete if the application needs to go to other government agencies for approval.

For example, the Ministry of Education's approval will be needed if a business owner wants to build a private education institute or school.

A registered filing agent will be best able to help you determine what agencies may need to approve the registration and provide a better overall estimate of the registration approval time.

Quick Facts When Registering a Foreign Sole Proprietorship

Sole proprietorship in Singapore differs in many respects than other countries. These quick facts will help familiarize you on how sole proprietorships work:

• Sole proprietorship is not a separate legal entity.
• Owners are accountable for all of their business liabilities.
• Profits are treated as income for the business owner
• Sole proprietorships cannot register another business firm
• Annual tax returns and audits of accounts are not required, as profits are taxed as personal taxes
• Investment in sole proprietorship is limited
• Renewal of the business is required annually

Running and operating the business is easier when the owner resides in the country. This allows for a tighter control of the business' operations, but it's not a necessity under current laws.

Foreigners are welcome to start and run their business in Singapore. The country's tough stance on corruption is a major bonus, and Singapore has been ranked as the easiest place to setup a business.

Singapore has a competitive economy, and the diversity of culture, architecture and languages makes this a top destination for business owners.

Singapore is also a safe, clean country with an efficient transport system and an education system that meets all international standards.

• Posted by admin
• 12 February 2018
• Articles, Corporate Taxation

Singapore has enacted customer accounting changes, for certain goods, that will go into effect on 1 January 2019. The new changes have been enacted in an attempt to deter fraud schemes and maintain Singapore's identity as a low-fraud country.

Sellers often hide the GST collected, and businesses in the supply chain will claim input tax in common schemes.

Items commonly used in schemes include: software, mobile phones and memory cards.

Understanding Customer Accounting

A taxable supply includes the sale of goods and services that does not include:

1. Precious metal investments
2. Residential properties
3. Financial services

All other items are subject to GST. Businesses in Singapore are required, by law, to charge and account for GST. Input tax claiming conditions allow businesses to claim GST paid for local purchases and goods imported.

Customer accounting accounts for output tax.

The customer, under customer accounting, must account for output tax. Suppliers shift the accounting responsibility to the customer in these circumstances. The customer must be:

• GST-registered
• Be the person purchasing the prescribed goods
• Must be purchasing the goods during the course of business

Under customer accounting, the responsibility to account for GST is shifted to the registered customer. This form of accounting does not allow the supplier to charge or collect GST when the sale is subject to customer accounting.

Suppliers are required to report the supply in their GST returns.

In the event that both non-prescribed and prescribed goods and services are rendered at the same time, the GST exclusive sale value is only used when the supply exceeds $10,000. Customer accounting doesn't apply, regardless of value, to non-prescribed goods or services.

Suppliers will be required to provide a tax invoice to GST-registered customers that shows, as the supplier, you have not collected GST on the supply. The invoice must also indicate that the customer has the responsibility to account for GST on the supply.

Customers benefit from the new accounting rules, which allow them to claim the input tax for the purchase. Input tax is allowed to be claimed when the purchase was for business use and the manufacturing of a taxable supply.

Relevant Supply of Prescribed Goods and Customer Accounting

The prescribed goods allowed under customer accounting include: off-the-shelf software, memory cards and mobile phones. Local sales of prescribed goods require customer accounting when the goods are purchased by a GST-registered customer for business purposes.

Customer accounting is only applicable when the GST-exclusive value exceeds $10,000 per invoice.

Customer accounting is not applicable to non-GST registered customers. That is, if a supplier sells mobile phones, memory cards or off-the-shelf software to a non-GST registered customer, customer accounting does not apply.

Instead, the supply will be standard-rated.

Goods that are exported to overseas customers will have zero-rating if it satisfies the conditions. When the conditions for a zero-rating are not satisfied, the supply of the goods must be standard-rated.

Suppliers that receive goods from customers for a relevant supply will account for GST chargeable. In this case, you as the supplier, receiving goods from a supplier as a GST-registered customer, will be able to claim input tax on the purchase.

Customer accounting does not apply in the event that the supply of the prescribed goods is an excepted supply.

Definition of Mobile Phone                               

A mobile phone, under customer accounting, is a phone that:

• Uses a cellular network to receive and transmit spoken messages
• Is a device with a screen size of 17.5cm or smaller measured diagonally

Even if the device meets the definition of a mobile phone, there are instances wherein the mobile phone is excluded from customer accounting. Exclusions occur when:

• The phone is purchased from an approved mobile service provider with whom the purchaser has a service plan or mobile subscription.
• The plan doesn’t involve collecting advanced payments.
• The mobile phone supplier also provides the plan.

Definition of a Memory Card

Memory cards are considered a device that uses flash memory data storage. These devices are used for the storing of digital information and excludes any drive that has an integrated USB interface.

These devices do not include:

• Portable external hard disks
• Thumb drives

Devices that fall into this definition may include:

• Memory sticks
• SD Cards

Definition of Off-the-Shelf Software

The definition of off-the-shelf software is one that is arduous, and where:

• The software is stored on a compact disk or similar medium
• The software has a license key or product key on the physical packaging

Software preloaded on a computer or hardware is excluded. For software to meet the condition of off-the-shelf software, it must not be customized in any way for the customer. Software in this case may include video games, console games, accounting software, anti-virus software, and downloads from the Internet.

Software downloaded from the Internet that does not come with a license key or product key is not considered off-the-shelf.

Backup copies of software is also not considered off-the-shelf software.

GST-Registered Supplier Requirements When Making a Relevant Supply

Suppliers are allowed to check if a customer is GST-registered through the IRAS website: http://www.iras.gov.sg. Customer accounting is applicable when the goods fall within one of the three categories above, and are sold to a customer under the following:

• $10,000 is spent in a single invoice
• GST-registration is valid

Invoices must be supplied when a relevant supply to a customer is made. The invoice must contain the following additional information:

• Information pertaining to the customer being required to pay GST
• The amount of GST to be paid

For example, the invoice may contain the following wording:

• Customer to account for GST of $100 to IRAS

Of course, the language should be discussed with a legal professional or accountant that can ensure the wording is up to standard.

Suppliers should only collect GST-exclusive price for prescribed goods when a relevant supply is made. In this case, the invoice should not display the price including GST. Sales which include additional supplies which may fall under zero-rated or standard-rated may provide a separate invoice for the relevant supply.

A separate invoice will make it easier to understand the output tax and clearer for the customer.

Suppliers are not allowed to charge GST on a relevant supply. Suppliers ought to make sure that their accounting software accounts for the new requirement. Tweaks or new software may be required to account for the 2019 changes.

GST-Registered Customer and Relevant Supply Requirements

When prescribed goods exceed $10,000, customers must supply their GST registration number to a supplier that is GST-registered. Customers must alert the supplier if they're making a purchase of the prescribed goods for non-business use.

The supplier, in the above scenario, would have to apply the standard-rate and charge on the sale.

Suppliers have the legal right to ask customers to supply, in writing, documentation that states that they're purchasing prescribed goods for non-business use.

Customers, under the new customer accounting rules, will take on the burden of accounting for GST on their supplier's behalf. The GST-exclusive price will be provided in the total value of standard-rated supplies box, or Box 1 on the form.

The GST amount will be input into the output tax due box, or Box 6.

Customer accounting is a way for ensuring accountability when sales are made and to lower instances of fraud. The new accounting method will go into effect in a year, so there is plenty of time for business to account for the changes.

• Posted by admin
• 12 February 2018
• Accounting, Articles

Accountants are able to get an intimate look at a company's books. When an accountant is tasked with auditing the books or doing a company's taxes, the accountant is often able to uncover accounting fraud.

But the field has since moved in a new direction.

There was a time when an external audit was a specialized area of the field, where evidence was gathered and an assessment of financial statements were made. The widespread corporations of today require a lot more diligence than corporations in the past.

Worldwide corporations today sell items in every country.

The world is connected, meaning different accounting approaches need to be implemented across a corporation. It's a tedious task for accountants, and it allows for fraud to occur. Complexity grows as a business grows, and financial crimes may even go undetected in many circumstances.

What is Forensic Accounting?

Forensic accounting's demand is higher than ever before. Fraudulent activities are on the rise, and the complexity behind the fraud requires a specialized skillset to unravel. White-collar crimes have spurred a demand in forensic accounting.

These accountants are hired by financial institutes, credit card companies and large corporations.

Forensic accountants are also seen in the public sector, working with law enforcement agencies to help detect financial crimes.

The difference between a mainstream accountant and one that focuses on forensic accounting is that the forensic accountant:

• Analyzes financial information
• Evaluates financial information
• Develops intelligence

These accountants are involved in cases that involve:

• Embezzlement
• Money laundering
• Illegal activity

A forensic accountant will help resolve court disputes by analyzing and extracting information from a company's accounting records and books. The role of a forensic accountant also involves their ability to clearly communicate financial information to their superiors and judges when involved in a trial.

These professionals may also be hired by corporations that want a trained professional to control their finances and ensure that no crime has occurred in the organization. Large corporations will have accountants on staff to help detect:

• Money laundering
• Misappropriation of funds

A growing problem includes the funding of terrorism through fund misappropriation and money laundering.

Interconnectivity in today's business world requires these highly skilled professionals to provide investigations across borders and increases the time it takes for investigations to be completed. Cultural difficulties and regulatory differences within countries requires the forensic accountant to communicate differences, address cultural concerns and even linguistic concerns.

Rapid changes and expansion of businesses have led to the necessity of accountants having to be digitally savvy.

These professionals will need to interpret large data sets in the big data world. Data analysis is becoming a fast requirement due to the vast volume of data available. Tech savvy criminals are, more than ever before, turning to technology to help cover up their fraudulent activities.

Singapore's White-Collar Crimes and Forensic Accounting

Singapore, a global financial center, remains vigilant against crime, and has introduced the world's first financial forensic accounting qualification in Southeast Asia. The Institute of Singapore Chartered Accountants announced in September 2017 the ISCA Financial Forensic Accounting Qualification (FFA).

The application for the qualification is available from March 2018 onward.

The ISCA states that Singapore has 1,000 forensic professionals working across a variety of sectors, including:

• Banking
• Insurance
• Law enforcement
• Public and private sectors
• Monetary Authority of Singapore

ISCA's qualification for forensic accounting professionals focuses on four main areas:

1. Accounting methodology and investigation approaches
2. Digital forensics
3. Financial crime compliance and investigation
4. Practical workshops

Response to white-collar crimes as well as data analytic and cyber response will also be part of the certification. Banking and financial center investigation will be a part of the certification, too.

Singapore has a statutory requirement that extends to all professional accountants. Accountants are required to report any suspicious transactions to the Suspicious Transaction Reporting Office (STRO).

The STRO is part of the Commercial Affairs Department of the Singapore Police Force.

Accountants in Singapore face the serious threat of criminal liability for not complying with reporting requirements. The STRO is crucial of accountants that know or suspect money laundering or potential terrorist financing and do not report the incident.

Fines and jail sentences are possible when non-compliance is proven.

Accountants may also be removed from the professional registrar if it's found that they failed to report to the STRO.

Forensic accountants are, now more than even before, an important part of keeping Singapore safe from terrorism. The country is facing an extreme threat of terrorism, which remains at its highest level in recent years.

Singapore has been targeted in the past, with accountants contributing to the safety of the country by uncovering money laundering and the funding of terrorism.

A report from 2016, titled "Mutual Evaluation Report," was issued by the FATF. The report recommended the strengthening of many service-related businesses through the use of accounting. A focus was put on legal firms, corporate service providers and accounting firms, which are often involved in money laundering as outlets that help form shell companies.

The report claims that accountants working for these service providers need to take the appropriate measures and due diligence to curb fraud.

The International Federation of Accountants (IFAC) also released a report in February 2017 that linked professional accountant roles to combating corruption. The report found that accountants, working alongside stakeholders and other professionals, helped produce favorable scores for the global measure of corruption.

Singapore remains one of the world's lowest countries for corruption. The Transparency International report, released in 2016, ranked Singapore as the 7^th-lowest country in terms of corruption.

Professional accountants are cited as a main reason for the country's low corruption figures, with ISCA members rising by 7,000 since 2012 from 25,000 to 30,000+.

Forensic accounting's popularity and necessity is expected to continue to rise as white-collar crimes become more sophisticated and common. Accountants will also look to deepen their skillset and become certified in forensic accounting to better help their careers and lower the risk of fraud within their employers.

The reputation of Singapore as a country that aims to lower corruption depends on the country's accountants to detect and combat fraud within multi-national countries.

• Posted by admin
• 12 February 2018
• Tips

One of the biggest challenges start-ups face is acquiring the capital they need to move forward with their operations. Fortunately, government agencies in Singapore provide equity finance schemes and cash grants for eligible startups to help new firms raise capital.

SPRING SEEDS

SPRING SEEDS, or the Startup Enterprise Development Scheme, offers equity financing options to local startups with innovative ideas and products.

As the investment arm of SPRING Singapore, SPRING SEEDS matches investments made by a third-party investor, with a limit of $2 million. The equity is distributed between the investor and SPRING SEEDS in proportion to the amount of money invested.

To be eligible, a startup must meet the following requirements:

• Have at least $50,000 in paid-up capital
• Be incorporated as a Private Limited company for less than five years
• Have identified a third-party investor
• Have high-growth potential with scalability
• Be able to prove substantial intellectual and innovative content

Investors must be able to contribute to the growth of the startup, and have the management experience as well as the business network to value-add to the startup. Investors must also be prepared to invest at least $50,000 in each startup.

ESVF Scheme

The Early Stage Venture Fund (ESVF) scheme first launched in 2008, and is administered by the National Research Foundation, or NRF.

NRF works with venture capital firms to co-invest on a 1:1 basis. These investments are made in early-stage tech companies that are based in Singapore.

Venture capital firms that take advantage of this scheme have the option of buying out NRF's share within a five-year period. Firms are required to pay back NRF's capital with interest.

NRF invests $10 million on a matching basis to seed venture capital firms that invest in Singaporean startups.

PIC

The Productivity and Innovation Credit, or PIC, is an initiative launched by the Revenue Authority of Singapore. Under the scheme, businesses can take 400% tax deduction up to $400,000 or a 60% cash pay-out up to $100,000 for investments in productivity improvements and innovation.

PIC covers six activities:

• Registration of IP
• R&D
• Acquisition or leasing of prescribed automation equipment
• Acquisition and unlicensing of IP
• Approved design projects
• Employee training

To be eligible for PIC, startups:

• Must carry active business operations in Singapore
• Must meet the three-local-employee rule if opting for the cash payout

Financial Sector Technology and Innovation Scheme (FSTI)

The FSTI scheme was launched by the Momentary Authority of Singapore (MAS) as a way to support innovation. The Authority has made a commitment to spend $225 million over a five-year period as part of the initiative.

The goal is to attract financial institutions that will establish innovation labs in Singapore and to support technology infrastructure.

Under the FSTI is a sub-scheme known as FSTI-Proof of Concept, or POC. Through the POC, MAS provides funding for up to 50-70% of qualifying costs (maximum of $200,000) for up to 18 months. This support is available for financial institutions in Singapore as well as IT providers working with Singapore-based FIs for early-stage development of solutions to industry problems.

Capabilities Development Grant (CDG)

The Capabilities Development Grant offers financial assistance to startups and SMEs in building their capabilities in 10 key business areas, including:

• Business excellence
• Service excellence
• Branding and marketing
• Human capital development
• Standards adoption
• Enhancing business processes for productivity
• Product development
• Financial management
• Intellectual property
• Business model transformation

To be eligible for this grant, startups must be registered and operating in Singapore and have at least 30% shareholding. The startup must also have at least $100m in annual sales turnover or have at least 200 employees.

Business Improvement Fund (BIF)

The Business Improvement Fund is available to all businesses registered in Singapore that are launching projects with a tourism focus and are run by the Singapore Tourism Board (STB). The goal of the fund is to drive innovation in the tourism industry, and to redesign business models and processes to improve competitiveness and productivity.

Funding will be awarded based on the STB's analysis of the merits and scope of the project.

SME applicants can receive up to 70% of qualifying costs, while non-SME applicants can receive up to 50% of qualifying costs.

Building Information Model Fund (BIM)

The BIM fund is designed to encourage the adoption of BIM collaboration in the built environment industry. Eligible companies can apply for up to $30,000 in funding to subsidize the cost of software, hardware, training and consultancy.

The fund is open to construction companies registered in Singapore that are also registered with one of the following:

• Accounting and Corporate Regulatory Authority Singapore
• Building and Construction Authority
• Board of Architects
• Professional Engineers Board Singapore

MRA Grant

The Market Readiness Assistance (MRA) Grant is designed to help cover up to 70% of the costs to cover the identification of business partners, overseas set-up and promotion in overseas markets.

To qualify, the startup must have a global HQ in Singapore and have an annual turnover of less than $100 million.

Innovation and Capability Voucher (ICV)

The ICV is an easy-to-use voucher that's valued at $5,000 and encourages start-ups to develop their capabilities. The voucher can be used for consultancy services to help the startup improve their core business operations in the following areas:

• Productivity
• Innovation
• Financial management
• Human resources

Each SME or startup can obtain up to eight vouchers. No project should exceed six months. Each project must also be complete before the next application.

Angels Investors Tax Deduction Scheme (AITD)

The AITD scheme was launched for approved angel investors who commit at least $100,000 in a qualifying startup. Angels receive a tax deduction of 50% of the investment after the two-year holding period. Eligible investments each year will be subject to a cap of $500,000 and the maximum tax deduction will be $250,000.

All of these grants and schemes are available to qualifying startups in Singapore. The goal is to promote innovation and growth, which will ultimately help improve Singapore's economy. The application process for most grants is simple and straightforward, and information can be found on the respective Authority's website.

• Posted by admin
• 16 January 2018
• Articles, Company Secretarial

Liquidation and strike off are the two primary options when closing a business in Singapore.

A Singapore company may decide to shut its doors for a variety of reasons, but winding down operations can be a lengthy, complex process. The amount of time it takes to shut down the operation will depend on how well the company has been administered and managed as well as the method chosen to close down.

What is Liquidation?

The Directors of a company can voluntarily put the business into liquidation. Members voluntary winding up occurs when a company is solvent and the Directors believe the company can pay its liabilities and debts within 12 months of starting the winding up process.

The company must first appoint a liquidator, who will be responsible for winding up affairs and file all required notifications under the Companies Act. All available assets will be realised and distributed amongst Shareholders.

In order to go this route, Directors must sign an affidavit declaring that they have made a full inquiry into the company's affairs and believe that all debts can be paid in full (along with statutory interest) within a certain period of time.

The declaration must also include an up-to-date statement of the company's liabilities and assets.

In order to be effective, the declaration must be made no more than 5 weeks before the liquidation and must also be filed with the Registrar of Companies within 15 days of commencing the liquidation.

The Director of the company may face imprisonment or a fine if the company cannot pay its debt in full within the specified period of time.

Liquidation also requires a special shareholders resolution, which must be filed with the Registrar of Companies within 15 days and advertised in the Gazette within 14 days of the adoption. During the special resolution, shareholders must approve the liquidation and appoint at least one liquidator.

The liquidation commences once the resolution is passed. At that point, the company exists purely for the purpose of winding up. The business may continue operations, but only to benefit of the liquidation.

With voluntary liquidation, Directors lose power and the transferring of company assets must be sanctioned by a valid liquidator.

What is Strike Off?

A company may also choose to close down using the strike off method. Under this method, a company may apply to ACRA to strike its name from the Register under the Companies Act (Section 344).

The ACRA may choose to approve the application if it believes:

• The company is not carrying out business, and
• The company can satisfy the criteria for striking off

In order to qualify for striking off, a company must meet the following requirements:

• Must not have any outstanding tax liabilities with the IRAS.
• Has not started business operations since incorporating, or has ceased operations.
• Does not have any debts owed to government agencies.
• No employers' CPF contributions owed to the Central Provident Fund Board.
• Have written consent from the majority of shareholders for the winding up.
• No involvement in court proceedings inside or outside of Singapore.
• No debts owed to any government agency.
• Cannot have outstanding charges in the charge register.
• Does not have current or possible liabilities or assets.

If a business incorporates and remains dormant, it may be approved for striking off. The company must submit a letter stating that the company:

• Has not had a business transaction since incorporating.
• Has not opened a bank account, or the bank account has been closed.
• Has not held an AGM, or the first AGM is not due.

If a company provides its last audited accounts, the accounts must not show any liabilities or assets. If there are liabilities and assets shown, the company must be able to prove that the assets have been disposed of and liabilities have been waived or settled.

A strike off application can be submitted by the company's Director, a professional firm or the corporate secretary using an online application.

How Long Does the Process Take?

Once the application has been submitted, the ACRA will process it within five business days. If approved, a letter will be sent to the company's registered office address, the IRAS and to the company's officers at their residential addresses.

If there is no objection within one month of sending the letter, the ACRA will publish the company's name in the Government Gazette.

If there is still no objection after three months, the ACRA will publish the company's name again and the name will be struck off the register. The Final Gazette Notification will include the date of the strike off.

The entire process can take five months to complete.

Objections

Interested persons can lodge an objection to the striking off of the company through Biz File.

If a person suspects a company may file for striking off, he or she may lodge a Notice of Intention to Lodge Objection to Future Striking off Application. The notification is valid for one year. If the company submits an application within that time frame, the objector will be notified.

A Lodgement of an Objection against Striking Off may also be filed by an interested person. In this case, the ACRA will halt the striking off process and send a notice to the company. The company will have two months from the filing of the objection to clear the matter.

If the matter is cleared within the time frame, the objector must file a Clearance of an Objection to Striking Off to allow the ACRA to continue with the process. If the matter is not resolved, the application will lapse, and the company will have to submit a new one.

Companies that have been struck off can be restored within 15 years of the striking off. Restoration requires a court order.

What's the Difference?

Liquidation and strike off are two very different processes for closing a company.

With liquidation, the company's Directors must be able to prove that the company can fulfill its debt obligations in full within one year of liquidation. There are no such requirements with the striking off method, but that's only because the company cannot have assets or liabilities to begin with.

Another difference between liquidation and strike off is the time frame. The striking off method can take significantly longer to complete – around five months – and objectors can complicate the process.

Either method can be complex and lengthy. A professional can help move the process along and act as a guide as the company winds up.

• Posted by admin
• 16 January 2018
• Articles, Corporate Taxation

Taxpayers should comply with their tax obligations, but a select few taxpayers engage in tax evasion and fraud. These practices can lead to billions of lost revenue annually, putting strain on both the economy and other taxpayers.

Sales Suppression Technology: The Basics

Tax fraud can happen in a variety of ways, but sales suppression is one of the most common methods of tax evasion. SST can be complex, or it can be as simple as not reporting income. Cash businesses, such as a restaurant that may have high cash volumes, may fail to record some sales.

Cash isn't as easily tracked as payments done through credit or debit cards.

Electronic sales suppression technology has also come into existence. Fraudsters will go through great lengths to not pay all of their taxes. Electronic suppression will:

• Alter transaction evidence

Electronic suppression can alter cash or credit transactions without leaving any evidence of the alteration behind. Transactions can also be under reported through various means, such as cancelling the transaction after it occurred.

Lack of proper data makes it impossible for tax authorities to assess a business's proper tax requirements.

Electronic Sales Suppression Tools

Editing accounting books or pocketing cash transactions is easier to spot than electronic suppression methods. Technology makes it easier to commit tax fraud, and there are two primary tools that are being used in electronic SST:

1. Phantomware

Phantomware is software that the fraudster installs in a cash register. The software is not easily accessible, and is accessed by the owner or installer of the software through a hidden menu. Operating in the background, the software will capture the transaction data before it's logged into the cash register.

For example, a customer pays $50 for goods:

• Phantomware logs the data before it's registered
• Phantomware holds the data until the business owner goes through the menu

Phantomware can manipulate the sales after a transaction. The $50 sales may be logged as $30, allowing the owner to effectively skim $20 off the proceeds untaxed.

2. Zappers

The presence of Zappers is also becoming more common. Zappers are external programs or devices that connect to the cash register. External programs, accessed online, are a popular choice for Zappers.

Much like Phantomware, Zappers allow for transaction records to be manipulated.

Phantomware and Zappers pose a problem for tax authorities because the cash registers do not have the Phantomware or Zappers shown. Manuals will not disclose the presence of these tax evasion systems.

Hidden away, these systems can:

• Alter sales amounts to be lower
• Delete entire sales records

Zappers have been created as sales suppression as a service. What this means is that the business owner can use a foreign Zapper to control sales. These Zappers operate over the Internet and pose even more problems for tax authorities because they can:

• Delete transactions
• Replace sales data
• Alter transactions

Foreign Zappers are so sophisticated in nature that the business owner can use them to crash a hard drive. Service providers, offering the tax evasion service to the business owner, are oftentimes out of the jurisdiction of the tax authority.

Business owners that engage in fraud can hide their involvement in the tax evasion because it's difficult to attribute the actions to the owner.

Data Recording Technology

Data recording technology is a main tool in the fight against sales suppression. The technology records all sales data immediately and securely as the transaction occurs. If the power goes out, the data remains safely preserved.

These tools are called by many names, all meaning the same thing:

• Fiscal memory device
• Sales recording module
• Fiscal control unit
• Fiscal device

Data recording technology can come pre-built into the cash register or it can be installed into an existing cash register. These same tools often send data directly and automatically to tax authorities. Cash registers send the data directly to server systems in either scheduled transfers or real time.

Automatic data transfer allows tax authorities to assess and audit data remotely.

Data recording technology plays an integral role in many economies:

• Belgium has an 8% increase in restaurant sales reported
• Hungary's VAT revenue increased by 15%
• Rwanda's VAT revenue increased by 20%
• Sweden's income tax revenues are estimated to grow by €300 million

Businesses also benefit from this form of technology. Business owners are often victims of employee theft, which involves many forms of sales suppression. Tools that share, record and store data also reduce the risk of audits.

Governments also benefit from data recording. Quebec is a prime example. The province reduced the time it takes to audit a restaurant from 70 hours to a mere 3 hours thanks to the province's sale recording module.

Quebec has now been able to increase the number of inspections to 8,000 per year, up from just 120. Audits are now being done remotely, too. Businesses no longer need to suffer from production loss due to copying hard copy documents. Businesses also suffer from fewer business interruptions and less time lost.

Costs in Fighting Sales Suppression Technology

Sales suppression technology can be prevented, but it's a costly endeavor. Easy implementation, effectiveness and affordability are key to fighting sales suppression. Costs are decreasing over time, with many off-the-shelf solutions being utilized.

Business owners or manufacturers can use these solutions to integrate the data recording technology into their cash registers.

Several factors go into the cost of integration:

• Point of sale system type
• Degree of modification required
• Size of the market

Costs can range from €30 - €1,000 or more, depending on the factors above. Tax authorities will also suffer from immense costs to enforce implementation. Authorities will also need to determine their own technical responsibilities resulting in costs, including:

• Certifying cash registers
• Inspect modifications
• Remote access costs
• Transaction data costs

Tax authorities can also opt to use data analytic tools that can detect unusual data being sent to tax authorities. These tools would use pattern recognition to be able to detect any anomalies or unusual activity.

Sales suppression technology is becoming more sophisticated and complex, but data recording technology is leading the fight against this form of tax fraud. Easy installation, costs and adaptation are key to ensuring that tax authorities can fight back against tax fraud.

• Posted by admin
• 16 January 2018
• Tips

The world is digital. There's an entire digital economy that the world connects to through personal computers, smartphones, tablets and an array of other devices. Economically, digital capital makes sense.

New products and services are created all the time on the digital sphere.

And you can break digital capital down into two main categories:

• Tangible assets
• Intangible assets

Understanding the difference between these two forms of assets is the key to understanding digital capital.

Tangible Assets and Digital Capital

At the basis of a tangible asset is the ability to hold an item. Tangible assets can be classified as physical assets, but they can also include platforms and software. When discussing digital capital, tangible assets may include:

• Routers
• Servers
• Software
• Purchasing platforms

From an accounting standpoint, these are assets that are often put on the company's books as an investment. We'll use Facebook as a prime example. The company has a plethora of tangible and intangible assets.

Facebook doesn’t disclose the full extent of their servers, but we know the company had 60,000 servers in 2010. Facebook has grown massively since then, and it's not out of the realm of possibility that the company, after building four massive data centers, doesn’t have over a million servers.

The company reported some $3.63 billion in network equipment in 2015, so this would be considered a tangible asset.

These servers are write-offs for the company and are part of the assets they maintain.

Intangible Assets and Digital Capital

Continuing with the Facebook example, the company has 2 billion users, and they have a lot of software and technology that they've built in-house. Patents are a part of the company's existence, and the intangible assets can include:

• Big data
• Analytic capabilities
• Social profiles
• Licensed technology
• Brand equity

Facebook, for example, collects user data and monetizes this data. Advertisers pay for access to this data, which is used to show relevant ads to the users on Facebook. These intangible assets have a hefty price tag.

Digital capital is new terrain for many of the world's economies. Accountants have been talking about digital capital for years, and the concept is shaping economic growth and policy. Intangible assets can lead to:

• Infrastructure investments
• Internet-related investments

Investments, on the government level, can be made to strengthen the world's digital capital.

Big Data's Role in Intangible Assets

Online companies have digital assets. The assets may be different than tangible assets, but they still remain valuable. Many companies have amassed a lot of user data. Facebook, our prime example, captures user data at every chance it gets.

The company even allows other websites to use their commenting system.

And this benefits Facebook because it allows the company to track users even when they're off their own website. The issue of big data is that many companies don’t even realize that they have valuable assets they can leverage.

Taking stock of intangible, digital assets can lead to growth opportunities.

Data can be organized, compiled into different datasets and leveraged by many companies. Oftentimes, the data doesn’t make much sense in its original form, or it doesn’t hold the same value until its organized properly.

This is digital capital that goes to waste.

Banks, for example, can use trends in loan applications to better judge a business's needs. If a business always requests a line of credit in May, and this is a trend, the bank can leverage this data to provide better loan packages that consumers can use.

There's also the argument that digital capital can be utilized improperly.

For example, if Facebook didn't create a social network or use the data they amass to add user-centric features, they would miss out on potential growth opportunities. The company's insight and ability to "make sense" out of their data is the key to the company's success. Facebook wouldn’t be the profitable, powerhouse of a company it is today if they weren't using their intangible digital assets properly.

Capital and the Treatment as Expenses

Digital capital is tricky from an accounting standpoint. Imagine Google in their effort to create Google+ to compete with Facebook. The company incurred massive expenditures during the creation of the social network.

Accountants treated the creation of Google+ as an expense.

Google's foray into social media didn't go as planned, but had it been a success, it might be capital. The social network still exists, and while it might never be Facebook or as popular as other social networks, it is long-lived.

Viewed as expenses and investments, these forms of technology grow into digital assets which must also be accounted for in the long-term.

Intangible assets are also what give many tech companies their high value. The data these companies hold and the technology they have created adds to the company's value. We've all seen the massive value that was placed upon tech companies in the 90s and early 2000s.

These companies may not have had the finances or tangible assets to make sense of their reported value, but the intangible assets helped push their value up.

New technologies and ways of offering services had led to a completely new way for businesses to make money.

Spending on the intangibles makes up a majority, over 66%, of digital capital. This capital is starting to become a real force in the world's GDP growth. It's estimated, back in 2013,  that digital capital made up 33% of all GDP growth on a global scale.

Tangible assets accounted for the remaining 66% of GDP growth.

The new terrain is changing the way that businesses and accountants view capital. Businesses that leverage the data they have amassed, license out their technology and make sense of big data are experiencing digital capital growth.

More dollars are being funneled into investments that lead to digital capital, too.

Companies are launching new business models to enter existing markets and even create them in many instances. Digital capabilities are becoming a requirement in many industries, with the potential to lead to digital capital growth.

Expenditures, in many circumstances, may need to be viewed as assets when it incorporates digital advancements and technology for a company.

Meta Description: Digital capital is shaping the world's economy, and many businesses fail to realize its importance. Learn what digital capital is and what it means for economic growth.

• Posted by admin
• 16 January 2018
• Tips

Blockchain technology is going to change the way the world does business. The technology was originally designed for Bitcoin implementation, but it is ideal for all business transactions. Blockchain was developed in such a way that it doesn't rely on bitcoin, so it can be utilized with or without the presence of bitcoin.

When blockchain is broken down into its most basic form, it's a digital ledger of transactions.

Programmers can change blockchain to record anything of value, but for businesses, financial transactions will be the key most important use of blockchain.

Distributed Database Storage

Blockchains are held in distributed databases. What this means is that the blockchain is in a shared, reconciled database. Millions of computers worldwide host the database, and all records are public and verifiable.

A lack of a centralized version of the database means:

• Less risk of corruptible data
• Accessibility from anyone on the internet

Blockchains store blocks across networks so that the blockchain doesn't suffer from single entity control and has no single point of failure.

Reconciliation of the blockchain is done every ten minutes, with every group of transactions reconciled called a "block." Self-auditing, blockchains are not able to be corrupted and they're fully transparent.

Decentralized by nature, blockchain offers security, enhancement to ledgers and provides less risk of corruptible data.

How Blockchain Will Affect Business in the Future

Ownership tracking processes are expensive using traditional methods. Blockchain will allow anything's ownership to be tracked. Offering a public ledger, the transactions that are part of the blockchain can be calculated by all users as a form of a balance sheet.

Balance sheets will never be the same and will allow:

• All parties to maintain a full copy of a ledger.
• Non-editable data that is impossible to erase and undo.
• Confirmation that a transaction occurred.
• Transactions that are all digitally signed to prove item sales.
• Confirmation of transactions in 10 minutes.

Blockchains are very powerful, and it's only a matter of time before they become an integral part of transactions across the world. The possibilities for blockchain are still unrealized to their full potential, but we have a few indications of what might happen thanks to this technology.

A few ways this technology may change the way the world does business includes:

• Real estate transactions, where both parties have synchronized copies of a transactions that ensure contract integrity. Digitally signed, blockchains are authorized and provide proof that a real estate transaction really occurred.
• Fraud in financial securities will be reduced greatly due to speed and the non-repudiation of blockchains.
• Artwork, where the chain of ownership can be used to determine authenticity of a piece.
• Tickets are routinely fraudulent and faked, but blockchain allows transaction authentication in a low-cost form.
• Auditing will be cut down dramatically thanks to synchronized data that is accessible.

Consensus among ledgers will be handled in many different ways. Open and decentralized ledgers will be difficult to embrace due to the nature of the model to require transaction acceptance.

Since no one is in charge of these ledgers, invalid ledgers can result in a ledger becoming de-legitimized. Bitcoin uses this form of a ledger, and it works well for the currency.

Private ledgers allow for a private entity to validate transactions. The debate over privatization is that the basis of blockchain is negated: decentralization.

Smart Contracts and a Global Searchable Database

A global searchable database of transactions would lower the costs of transaction searches drastically. This technology is important, but then there's the possibility of what's called "smart contracts."

Blockchains can consist of smart contracts, which sound complex on the outside but are already in development today.

Contracts are routinely expensive, causing many transactions to take excessive time to complete. Smart contracts eliminate this long wait and allow for:

• Self-execution of complex instructions

In effect, the contract will go into effect using autonomous agents. That is, there's no need for coordinating costs and working with an agency. Little or no management is needed with smart contracts.

Contracts today, for high-value items, may include money being put in escrow along with human interaction. The instructions, provided to the escrow company, would need to be followed by a human that is responsible for the implementation of the contract and its instructions.

Smart contracts eliminate many of these contractual hiccups caused by humans.

The contract itself would include coding that will be executed once the contract is signed. For example, if a billionaire is selling a yacht, smart contracts could help.

• Billionaire A is selling a yacht to billionaire B for $50 million.
• A smart contract is made.
• Upon the contract being signed, the yacht is transferred to billionaire B.

The coding in the contract only executes upon the contract's signature. There's no need to wait for a third-party to execute instructions within the contract.

Blockchains will change the way of the financial world.

There are a myriad of pilot programs using blockchains, and money is pouring into the technology to bring it into the mainstream. Accounting experts need to stay on top of the blockchain revolution.

A shift in the way transactions are handled and businesses are managed is underway.

Transparency and business efficiency will increase thanks to blockchain. Accountants will be the first source of information for clients that are looking to implement blockchain into their businesses.

Adoption of Blockchain is Underway

Industries are starting to look to blockchain for intellectual property. Ascribe, a company dealing with the creators of digital art, allows their clients to watermark their work and transfer it. Blockchain technology ensures that the artist is paid.

And the art is transferred from one collection to the other with blockchain.

Artists also have control of their digital art, allowing them the choice of when and where the art is deployed. It's a way to use blockchain that has worked well to make sure that digital artists are compensated accordingly.

We're at the forefront of a transactional change in the way we conduct business, and it's going to make transactions more transparent and robust than ever before.

• Posted by admin
• 16 January 2018
• Tips

Entrepreneurs and business owners can invest in Singapore or start up a business through the Global Investor Program (GIP). The GIP program also allows investors to apply for Singapore Permanent Residence status.

GIP is the brainchild of the Economic Development Board (EDB), and its goal is to encourage those interested in PR status to investment in Singapore. Permanent Residence status will allow investors to remain in the country while tending to their businesses.

What Investment Options are Available?

GIP offers two investment options:

• Option A: Invest a minimum of S$2.5 million in a new business, or the expansion of an existing business.
• Option B: Invest a minimum of S$2.5 million in a GIP fund that will invest in Singapore-based companies.

Who is Eligible for the Global Investor Program?

Along with having the capital to invest, applicants must also meet certain requirements put forth by the Economic Development Board.

Investors may be eligible for GIP and to apply for PR if they have:

• A successful entrepreneurial background; and
• A substantial business track record.

In order to be considered, a GIP application must meet the following assessment criteria:

At Least 3 Years of Entrepreneurial and Business Experience

Applicants must have at least three years of business success under their belts, and must be able to produce audited financial statements of their companies for the last three years.

Financial statements must be audited by an accredited firm.

Be Engaged in the Right Industry and Have a High Turnover

The company must be engaged in at least one of the industries listed in Annex A.

Additionally, the company's turnover must have been at least S$50 million in the year preceding the application. The company must have earned a minimum of S$50 million on average for the three years prior to the application.

Investors may consolidate their businesses, which all must be engaged in industries listed in Annex A, to meet the minimum turnover requirement.

Must Hold 30% Share of the Company

Investors with privately-held companies should have at least 30% shareholding in the company. The applicant's role in the company as well as its profitability and growth will be taken into consideration.

Detailed 5-Year Investment or Business Plan

Along with the above requirements, applicants must provide a 5-year investment or business plan that includes annual financial projections and projected employment.

Investors will be required to meet the third-year milestones outlined in the plan and complete the business plan within five years of being granted PR final approval.

If investing in an existing company, the plan must also include the following third-year milestones:

• Annual total business expenditure of S$1 million or more
• The hiring of at least 5 additional employees

PR Status and Re-Entry Permit

GIP allows investors to apply for Permanent Residence status. Spouses and unmarried children under 21 years of age at the date of the application may also apply for PR under the GIP application.

Men who obtain PR status will be liable for National Service.

Parents of GIP applicants cannot apply for PR, but can apply for a Long Term Visit Pass, which lasts five years.

Once an applicant's PR is finalized, a Re-Entry Permit will be issued, which is valid for five years. The REP allows the applicant to maintain PR status when traveling outside of Singapore.

The REP permit will be renewed if the investor can meet the following requirements:

For Option A Applicants

For a three-year renewal:

• Fulfilled investment conditions under Option A, and
• Either:
  • The business being invested in incurs – in Singapore – at least S$1 million more in expenditures per year than the total business expenditure in the third-year milestone; and
  • The company being invested in employs at least five more employees in Singapore, in addition to the employment requirements in the third-year milestone.

OR

• You or at least one of your dependents under PR resided in Singapore for more than half of the time.

For a five-year renewal, investors must meet all of the above requirements.

For Option B Applicants

For three-year renewal:

• Must meet all investment conditions under Option B; and
• EITHER:
  • Establish a business in Singapore that employs a minimum of 5 Singapore citizens and has incurred a minimum of S$1 million in total business expenditure in Singapore.

OR

• The applicant or one of the applicant's dependents lived in Singapore at least half of the time.

For the five-year renewal, applicant must meet all of the above requirements.

The Application Process

Applying for GIP is a multi-step process that starts with a non-refundable application fee of S$7,000. The fee must be sent as a single transaction, and must be for the full amount.

The transfer must include the applicant's name and date of birth.

The next step is to download the application forms – three in total:

• Form A
• Form B
• Form C

All forms can be submitted to https://application.sgip.gov.sg/public after completion. Several supporting documents must also be submitted.

If the documentation checks out, an interview will be arranged. If the application is approved, AIP (Approved-in-Principle) Permanent Residence status will be granted by the Singapore Immigration and Checkpoints Authority (ICA). The AIP PR is valid for six months.

In order to obtain PR status, the investment of S$2.5 million must be made within six months of obtaining AIP PR status. The payment must be made using a personal bank account in the applicant's name, and the bank must be a Singapore-registered institution.

After submitting the investment, hard copies of the following documents must be provided:

• Original signed copy of the "The Investment Undertaking."
• A Share certificate, or certified copy of investment documents.
• Bank statements proving that the investment was made from the applicant's personal bank account at a Singapore-registered institution.

Once the documentary evidence of the investment has been received as well as the signed Investment Undertaking, applicants will be issued a Final Approval of your PR status by the ICA. Applicants must formalize their PR status within 12 months of the final approval.

Those who choose Option A for investment will be required to meet other criteria after formalizing PR status.

• Posted by admin
• 16 January 2018
• Articles

VAT MOSS, also known as VAT Mini One Stop Shop, is a new regulation that went into effect on 1 January 2015. The regulation, which affects digital products sold in the European Union, makes VAT chargeable at the place of purchase rather than the place of supply.

The regulation is a type of Goods and Services Tax (GST) designed to generate tax revenue for the EU.

The goal of VAT MOSS was to prevent major online retailers, like Amazon, from funneling sales through low-VAT countries. But the regulation inadvertently affects sole traders and smaller companies with fewer resources.

News of the regulation sent online retailers in a panic – rightfully so. But it's important to note that the regulation applies to businesses selling digital products to consumers. If you offer services to businesses as a designer, for example, the VAT MOSS rule may not apply to your business.

A Primer on VAT MOSS

There are two types of VAT MOSS scheme:

• Non-Union
• Union

The Non-Union VAT MOSS scheme applies to businesses that:

• Are based outside of the EU
• Provide digital services to EU consumers
• Do not have business or fixed establishments in the EU

The Union VAT MOSS scheme applies to businesses that:

• Are based in the United Kingdom, or are based outside the EU and have a fixed establishment in the United Kingdom.
• Provide digital services to EU consumers.
• Are registered for UK VAT.

If your business's turnover falls below the £81,000 UK VAT threshold, you'll still need to register for UK VAT to use the Union VAT MOSS scheme.

Who Does VAT MOSS Affect?

VAT MOSS rules have caused confusion – and a little chaos – amongst retailers in the EU. However, many creative professionals are unsure of whether the regulation apples to them.

The VAT changes apply to anyone selling the following to consumers:

• Web hosting services
• Online magazines
• Website supply
• Text or images, including screensavers, photos, e-books and other digitized documents, films, music and games
• Software updates and supplies of software
• Distance maintenance of equipment and programs
• Advertising space on websites

The key thing to remember here is that the VAT MOSS regulations apply to digital products sold to consumers. If you sell to businesses, the VAT changes will not affect you.

The regulations can be muddy at times, making it difficult to determine which products fall under the regulation.

Of note, the regulation appears not to apply to live services. Live webinars would not be covered by the new rules.

If you offered an online course with pre-recorded videos, downloadable PDFs and support from a live tutor, the new regulations would not apply. But if you offer an online course with pre-recorded videos and downloadable PDFs, the new regulations would apply.

The addition of a "live" service is something to consider if the VAT MOSS rules apply to your business.

How Do You Pay VAT MOSS?

If the new regulations apply to your business, you will need to register for VAT MOSS when you make a sale. A notice must be sent to HMRC by the 10th day of the month following the month that you supplied the digital product.

If you make a sale in March, you'll need to notify HMRC about the transaction by 10 February to register for VAT MOSS.

Your business will need to be VAT registered if you're selling services online, but you won't lose the £81,000 threshold.

Buyers will have to provide a billing address and the member state of which they are a resident.

There are two ways to comply with the new regulation:

• Register for VAT in every EU state you have customers. There are 75 different VAT rates in the whole of the EU.
• Voluntarily register for VAT in the United Kingdom, and submit a VAT MOSS return online. HMRC will then give a portion of the payment to the tax authority in every relevant member state.

Voluntarily registering for VAT is the simplest solution, but doing so will require you to charge VAT on every product you sell – no matter the cost. With standard VAT registration, there's an £81,000 threshold. VAT MOSS has no minimum sales amount.

VAT MOSS returns must be filed quarterly and cannot be paid through direct debit.

Businesses are free to de-register from the VAT MOSS scheme at any time. If you decide to leave, you'll need to give the HMRC notice at least 15 days before the end of the quarter.

Once a business de-registers, it cannot re-register for at least two calendar quarters.

VAT MOSS Concerns and Business Impact

The VAT MOSS regulation does come with concerns and has the potential to hit small businesses particularly hard.

Voluntarily registering for VAT, the least-complicated solution, requires sole traders and small companies to pay 20% of their revenue in VAT. Businesses are also required to keep personal information related to each consumer, which puts them into data protection laws.

The MOSS scheme requires businesses to provide two of the following bits of information about each consumer:

• IP address
• Bill address
• SIM country code
• Bank location
• Location of fixed land line

Records of this information must be kept for ten years.

For many small companies, having to ask for personal information can hurt sales. And if you are selling to businesses, you'll need to prove that they're a business by having their VAT numbers. If you're a freelancer working with other freelancers that are not VAT registered, they will be considered consumers and the rule would apply to your business.

To work around this issue, you might consider selling your products through an established store or an online marketplace. In this case, the platform through which you're selling will take care of VAT MOSS compliance. Of course, selling through online marketplaces eats through a business's profits, as these platforms take a percentage of sales as commission.

For businesses nearing the £81,000 threshold, many experts recommend simply registering for VAT and growing your business. But if you have a lower turnover, they recommend stopping that part of the business.

Failing to comply with VAT MOSS regulations may cause you to face an "unlimited" fine.