Capital Statement: Does Your Declared Income Support Your Accumulated Assets?

Key Takeaway

  • Tool used by the IRB to detect under-declared income
  • Rationale of the capital statement approach
  • The importance of maintaining complete records

What Is A Capital Statement?

  • The personal ‘balance sheet’ of an individual
  • It puts together all the assets and liabilities of an individual, adjusted for non-taxable income/losses and the individual’s private and personal expenses
  • One of the most effective tools used by the Inland Revenue Board (‘IRB’) to ascertain whether an individual has under-declared income in the past

Assets Scrutinised By The IRB

  • Properties
  • Motor vehicles
  • Shares and other investments (listed AND private companies)
  • Bank accounts (local AND foreign bank accounts)
  • Credit card accounts,
  • Directors’ account balances

Period Covered During An Audit/Investigation

  • Normally covers a period of the past six years

Challenges Faced By The Taxpayer

  • Loss of documents
  • Unable to recall the transactions or flow of funds

Capital Equation