How to File Your Yearly Corporate Tax Filing?
STEP 1 ： File Estimated Chargeable Income (ECI)
The first step to be completed when filing corporate tax in Singapore is that of filing an Estimated Chargeable Income (ECI) form. This form estimates the company’s total amount of chargeable income IRAS within three months of the financial year-end of the company.
Only companies which are specifically exempted from filing an ECI form do not have to do so. These companies which are exempt are those which:
- Have a total annual revenue of S$5 million or less
- Did not have any estimated chargeable income during the relevant year of assessment (YA).
Declaration of Revenue in an ECI Form
The ECI must be stated, and company’s revenue must also be declared in the ECI Form. This declaration is compulsory with effect from January 2017.
Revenue refers to a company’s main source of income and excludes items such as gain on disposal of fixed assets. If the company is an investment holdingcompany, the main source of income is investment income (e.g., interest and dividend income).
Should the audited financial statements be unavailable, one can refer to the company’s management accounts for the purpose of declaring the revenue amount. Should the revenue amount based on audited financial statements be different from that declared in the ECI Form, and there is no change in the ECI, the revenue figure does not have to be revised.
STEP 2 ： File Tax Computation With Form C/CS
Once this has been done, the company owner is to file the company’s annual income tax return with IRAS. This income tax return specifies the exact amount of a company’s income during a specific tax year. It must be filed by every company in Singapore.
Even companies which are to be struck off or liquidated as well as companies which have made losses instead of profits must file this income tax return. Dormant companies are also to file an income tax return, but when they do so, they are to submit a more simplified version instead of the standard tax return form.
The vast majority of companies based in Singapore must use Form C to file an income tax return. Information which is to be submitted on a copy of Form C includes tax computation, financial statements, and supporting schedules. However, there are also certain companies which are to use Form C-S instead of Form C for this purpose.
Such companies must have fulfilled the following criteria:
Incorporated in Singapore with annual revenue not exceeding S$5 million
Income must have corporate income tax imposed at 17% and therefore no claims on tax reduction
No claims on any foreign tax credits or investment allowances for the purposes of tax reduction
What Business Expenses to Be Included in Tax Computations?
Business expenses are expenses paid to keep a business in operation. However, business expenses may be deductible or non-deductible. When deductible, they reduce a taxpayer’s taxable income and the amount of tax which must be paid.
Deductible Business Expenses
Generally, deductible business expenses are those “wholly and exclusively incurred in the production of income”. In other words, they must satisfy all these conditions:
Expenses are solely incurred in the production of income.
Expenses are not a contingent liability, i.e. they do not depend on an event that may or may not occur in the future. In other words, the legal liability to pay the expenses must have arisen, regardless of the date of actual payment of the money.
Expenses are revenue, and not capital, in nature.
Expenses are not prohibited from deduction under the Income Tax Act.
What Happened after Tax Submission?
Once IRAS has assessed and approved all forms which have been submitted, it will send a Notice of Assessment (NOA) to the company. The Notice of Assessment provides information about all of the company’s tax liabilities and is due within 30 days of receiving it.
Should the company intend to object to the tax assessment specified by IRAS, it may also use the NOA to do so.