Singapore is an emerging Asian economy and is quickly becoming a global economic hub. Thanks to its lenient taxation policy, the market has been buzzing with international investments and trade opportunities. Considered to be a tax haven, all companies in Singapore are required to pay corporate taxes as prescribed in the Income Tax Act.
What Is Corporate Tax?
Corporate tax is charged by governments and levied on a firm based in the country that has earned a profit in the year of assessment, through its business operations. The tax paid by a particular company, on its chargeable income, is calculated by subtracting the expenses incurred from the revenue earned. The predetermined tax rates are then applied to get the final tax amount that the company owes to the government.
The guidelines regarding corporate taxation vary from one country to another. Singapore makes use of a single-tier tax system that is applicable to all the companies based in the country. There are several providers of corporate tax services in Singapore who offer professional assistance. The Inland Revenue Authority of Singapore (IRAS) is the regulatory authority responsible for the collection of taxes, monitoring tax policies, and regulating the process.
Highlights Of The Taxation System In Singapore
- Taxes levied in Singapore are based on the profits earned and not the revenue generated. This is calculated using the effective tax rate, which is rather low, compared to other countries, due to the tax incentives and exemptions offered to the companies based in Singapore. Apart from this, there are certain types of foreign-source incomes that are exempted from taxation.
- Incentives are given to investors who are looking at investing in promising industries in Singapore. Tax exemptions are also offered to encourage the growth of newer companies.
- A territorial tax system is applied in Singapore where double taxation is avoided on income earned in countries that have signed the treaties. Singapore has tax treaties with over 80 countries to avoid double taxation. However, for non-treaty countries, the foreign-sourced income will be taxable under the unilateral tax credit system.
- Capital gains aren’t subject to tax in Singapore.
- Dividends to shareholders are tax-free.
How Much Corporate Tax Do Companies Usually Pay?
The rate of corporate tax in Singapore has been fixed at the current rate of 17%. There are certain conditions laid down by the Singapore Government wherein companies can qualify for tax exemptions. Income generated by a company in Singapore as well as the income extracted to Singapore from a foreign source is considered taxable income. Any kinds of gains, profits, revenue, royalties, or premiums fall under the bracket of taxable income as well.
The Process Of Filing Corporate Taxes In Singapore
Corporate taxes and the relevant documents are to be submitted annually by all companies in Singapore. From the financial year 2020, all companies are required to file their corporate taxes digitally as the offline procedure has been phased out completely. While many are still unaware of this taxation process, several companies have sought help from corporate tax service providers in Singapore such as DNA Accounting. With a team of approachable service managers, affordable services, and a strong understanding of the taxation schemes, DNA Accounting has emerged as one of the finest accounting firms in Singapore dealing with corporate tax services.
A company has to go through a two-step procedure while filing taxes with IRAS:
1. Estimated Chargeable Income or ECI – This step involves giving a record of the company’s annual taxable income, tallied after deducting the expenses. The company has to provide an estimate of its chargeable income within 3 months of the financial year-end. It’s also mandatory for all companies to file ECI unless it is exempted from the tax structure.
2. Form C, Form C-S or Form C-S (Lite) – This is essentially the company’s declaration of actual income for that particular year of assessment as opposed to the estimated record in ECI. Tax returns are generally filed using Form C, along with official financial statements, tax computations, and other supporting documents. Form C-S is a simplified version of the same form which can be submitted by a company only when it fulfills certain conditions; for instance, if the annual revenue is S$5 million or lesser. Form C-S (Lite) income tax return requiring only six essential fields to be completed for companies with straightforward tax matters, which is introduced from YA 2020.
Why Should You Consider Seeking Help From Corporate Tax Service Providers in Singapore?
Although the taxation system is relaxed, the rules and regulations regarding the filing of corporate taxes are quite stringent in Singapore. Late filing of corporate tax is a punishable offence and can land the company in legal trouble. The board of directors of the company may be prosecuted in the court or fined up to S$10,000. Penalties are levied on inaccurate tax filings, late or non-payment of tax, and evasion of taxes. To avoid such penalties, it would be recommended that you appoint a firm who can take care of tax filings on behalf of your company.
DNA Accounting is a trustworthy and reliable name in the corporate accounting circuit in Singapore. We ensure that tax filings for our clients are done on a regular and timely basis to rule out any chances of outstanding amounts. With decades of experience in filing tax returns, partnering with a company like DNA Accounting guarantees up-to-date tax records that are compliant with the statutory requirements of IRAS. Apart from filing corporate taxes, we also provide several services related to accounting and bookkeeping, which are just as important as taxation.
Taxation Services – Corporate Tax
It is important to have a professional tax agent to give you valuable advice and accurate tax computations to ensure your business is in compliance with Singapore statutes and laws. Accounting DNA does all this while also providing the most efficient corporate tax saving advice to maximise tax benefits. In addition, your company can load off the extra time spent rectifying issues with IRAS by allowing us to file the correct data for you from the get go.
The following are some taxation processes that every company must ensure to adhere to:
- All companies must file Estimated Chargeable Income (ECI) within three months from the end of their financial year except for companies that qualify for the administrative concession and those that are specifically not required to file.
- Companies incorporated in Singapore are required by law to submit their annual income tax return by 15 December each year (e-filing).
- Companies are required to prepare Form C/ Cs, tax computation and schedules as part of the income tax filing requirement.
Our Singapore Taxation Services include:
- Submission of Estimated Chargeable Income (“ECI”) filing
- Preparation and Submission of tax computation & Form C/Cs to Inland Revenue Authority of Singapore (IRAS)
- Sending you a reminder about the deadline to be met for ECI filing, GST filing and Annual Tax filing.
- GST Registration – Voluntary / Compulsory
- Preparation and Submission of GST return (Form 5)
Working out Corporate Income Taxes requires specific expert knowledge in order to have a comprehensive understanding to best manage a company’s taxes. For instance, to understand whether the income is taxable or if the expenses are deductible, we need to understand the nature of them. Not all business expenditures can be claimed in full in one year.
It is an offence not to declare all assessable income. It is important to note that claiming deductions of expenses that were not incurred for company purposes is not deductible, and claiming personal expenses in the company tax is a wrongful act. Certain company expenses are claimable as part of expenses, however, they are not deductible in the tax computation. E.g.: sales staff’s private car fuel expenses can be reimbursed from the company but they are not deductible in the tax computation.
We will send you reminders when the deadline is drawing near and ensure that the company meets the deadlines of ECI filing, annual tax filing. If you do not file the tax return on time, there will either be a penalty incurred or fines imposed.
Goods and Services Tax
As a GST-registered company, you’re authorised to collect GST from your customers on behalf of the government. As such, it’s important to know which types of revenue are entitled for GST collection on behalf of the government.
If your company does a wrong billing, which involves collecting GST from revenues that are not entitled for GST collection, this is considered a violation which may result in a disruption in your cash flow.
Also, a wrongful deduction of fees from customers may pose problems for your business in the future. Such mistakes not only raise issues with IRAS, it may also result in your company losing a valued client. If convicted of any offences, you will be liable to pay a penalty and shall be fine and in worse cases, serve imprisonment time.
This is a daunting task for many business owners as GST registered companies always face difficulties in determining whether GST is claimable. But with our professional advice, we will guide your company in identifying the claimable items in GST reporting. To better understand how Accounting DNA can help you navigate this complex process.
We will constantly keep our clients posted on the relevant processes with regards to the steps we have taken from the beginning till date.
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