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
