Singapore is undoubtedly a hotspot for new enterprises as well as established ones. Why? because its tax policies are tolerant and less restrictive.
Singapore welcomes foreign investors, as opposed to other regions of the world that employ tax rates to stifle the development of new firms. The corporate income tax is one of the most advantageous taxes for starting a business in Singapore.
This article will provide a quick rundown to file corporate tax returns in Singapore, along with instructions on making tax payments.
TYPES OF TAX RETURNS IN SINGAPORE
Estimated Chargeable Income (ECI)
The Estimated Chargeable Income (ECI) calculates a company’s taxable profits for a specific Year of Assessment (YA) after deducting expenses that are eligible for tax deductions. Your business will need to submit ECI unless it satisfies the requirements below.
- No more than $5 million in revenue is generated during the financial year
- In the year of assessment, the ECI is zero.
Form C/C-S/C-S Lite
Form C, Form C-S, and Form C-S Lite are tax forms used by companies in Singapore to file their corporate income tax returns.
Form C is used by companies that are required to prepare their financial statements in accordance with Singapore Financial Reporting Standards (SFRS) or International Financial Reporting Standards (IFRS). Form C-S is used by small companies that are eligible to file the simpler Form C-S. Form C-S Lite is used by companies that are eligible to file the simpler Form C-S but are required to file a simplified version of the form.
In summary, Form C is for companies that are required to follow SFRS/IFRS, Form C-S is for small companies, and Form C-S Lite is a simplified version of Form C-S for small companies.
Form C-S
Companies that fit the following criteria must submit Form C-S with their tax returns.
- A Singapore-incorporated firm is required
- Yearly revenue of $5 million or less was required
- Financial statements and tax calculations are not required to be submitted
- Only produced income is 17% taxed
- Making no claims carrying back current-year capital allowances and losses, group relief, investment allowance, foreign tax credit, and tax deducted at source.
Some businesses are unable to fulfill the conditions needed to complete Form C-S.
They have two alternatives in this situation: Form C or Form C-S (Lite).
A more straightforward form of Form C-S is Form C-S (Lite). Businesses employing Form C-S (Lite) generate less than $200,000 in annual revenue.
On the other hand, Form C is created for businesses that cannot submit Form C-S or Form C-S. (Lite). The business must have filed financial statements, tax computations, and other documents before filing Form C.
WHO IN SINGAPORE IS REQUIRED TO PAY CORPORATE TAXES?
In Singapore, any company that is incorporated in Singapore or carrying on business in Singapore is required to pay corporate taxes on their income earned in Singapore.
This includes companies registered as foreign companies and having a place of business in Singapore.
In addition, a Singapore-resident company that receives income from foreign sources that are deemed to be derived from a Singapore source is also subject to corporate tax.
A company will be considered a Singapore resident company if its management and control are exercised in Singapore.
Exemptions may apply for certain companies, such as tax-exempt entities or companies that qualify for start-up tax exemptions.
It’s important to note that the company must file its tax return even if they are not making a profit or have no tax liability.
WHEN MUST I FILE CORPORATE TAX IN SINGAPORE?
A business should be regarded as tax-resident in Singapore if its control and management were exercised there for the Year of Assessment (YA) prior.
The company’s income will be evaluated over 12 months, known as the YA. For YA 2023, the 12-month span, for instance, would typically go from 1 January 2023 to 31 December 2023.
Instead of the location of the company’s incorporation, the location where strategic decisions are taken (which is typically where the board meetings are held) should be used to determine where the company’s control and management are exercised.
What Corporate Tax Amount Am I Required to Pay?
Singapore has a fixed rate of 17% company tax on taxable revenue.
You can refer to a tax calculator. It includes explanations to assist you in calculating your taxes as well as checks for frequent errors.
STEP-BY-STEP GUIDE TO FILING CORPORATE TAX RETURN IN SINGAPORE
1. File the ECI Form
In Singapore, the process of paying corporate taxes typically starts with filing an Estimated Chargeable Income (ECI) form with IRAS within three months of the financial year’s end. This form provides an estimate of the company’s chargeable income.
Companies required to file their ECI must do so electronically starting in YA 2020. Through the IRAS-maintained one-stop myTax Portal, you can electronically submit your ECI form.
2. Annual Income Tax Return Filing
The business must then use the same myTax Portal to submit its annual income tax return to IRAS. All businesses, including those experiencing losses, seeking to be struck off the registry, or in liquidation, must file an annual income tax return.
Form C, which requires the production of financial statements, tax computations, and supporting schedules, is typically used by businesses to file their income tax returns. However, starting with YA2020, a corporation may submit Form C-S or Form C-S (Lite).
NOTE: A dormant firm, defined as one that has no operations and no revenue for the fiscal year, is also permitted to file a simplified Form C-S/C for Dormant Company in lieu of the complete Income Tax Return.
3. Receive IRAS’ Notice of Assessment (NOA)
After receiving the required paperwork, IRAS will examine it before sending the company a Notice of Assessment (NOA) by May 31 of the following year.
This NOA is intended to give a thorough breakdown of the company’s tax obligations and give it a chance to contest IRAS’ tax assessment if so chooses.
4. Paying the Estimated Corporate Tax
If there are no concerns stated in the NOA, the business has 30 days from the NOA’s date to pay the assessed corporate tax.
Numerous means, such as interbank GIRO, internet banking, checks, or telegraphic transfers, are available for this.
PENALTIES FOR INACCURATE TAX FILING
If the income tax returns were incorrectly filed without any desire to dodge taxes, IRAS could:
- financial sanctions of up to 200% of the undercharged tax;
- monetary penalties of up to $5,000; and/or
- imprisonment for a maximum of three years.
Penalties for Filing Tax Returns Lately or Not at All
There are repercussions for businesses that do not file their corporation taxes or do not file them by the deadline.
They comprise:
- Sending out a probable Notice of Assessment (NOA)
- Compounding of Offence
WITH RELIN CONSULTANTS, YOUR CORPORATE INCOME TAX RETURNS ARE IN GOOD HANDS
For companies who are unfamiliar with or have never filed taxes before, navigating Singapore’s corporate taxation environment can be particularly challenging.
You may get assistance from trustworthy and knowledgeable professionals like the team at Relin Consultants to submit your business taxes correctly.
We take the utmost precaution to guarantee that your company tax file is successful and proceeds as planned!
