This guide will help you navigate the process of filing corporate income taxes, especially if this is your first time (Image: Canva)
Tax filing season is here! For new business owners just getting their feet under the table, this may be a confusing time with many questions - do I need to file corporate taxes? How much do I pay in taxes? How do I file them?
Fret not, this all-in-one guide will tell you everything you need to know about tax filing for your business, from who needs to do so, how much to pay, and what you will need for the process.
Who needs to file corporate income tax?
The Inland Revenue Authority of Singapore (IRAS) considers the following as companies, which will be required to file their corporate income tax:
A business entity incorporated or registered under the Companies Act 1967 or any law in force in Singapore. It usually has the words ‘Pte Ltd’ or ‘Ltd’ as part of its name
A foreign company registered in Singapore such as a branch of a foreign company
A foreign company incorporated or registered outside Singapore
Do note that a sole-proprietorship or partnership business is not considered a company. Taxes for sole-proprietorships or partnerships are to be filed as part of individual income tax.
How do I calculate my taxable income?
Companies will be taxed for the income they have earned in the preceding financial year. This means that in 2023, you will be taxed for income you’ve made in the financial year 2022. In tax terms, 2023 is known as the Year of Assessment (YA).
For most companies, the financial year-end would be on 31 December, although some companies may choose other dates like the last day of each quarter.
Do note that if your company’s financial year-end does not fall on 31 December, you will need to inform the Inland Revenue Authority of Singapore (IRAS). The same applies if your financial year lasts longer than 12 months.
Companies in Singapore are taxed at a flat rate of 17 per cent of its chargeable income, which refers to your company’s income after deducting tax-allowable expenses. Where applicable, capital allowances and reliefs can also be deducted from your company’s income when filing, to reduce its taxable income and the amount of tax payable.
Tax filing for Sole-Proprietorships or Partnerships
Owners of sole-proprietorships or partnerships will file their taxes as part of their individual income tax. To prepare for this, owners of such businesses are required to keep full and accurate records and accounts of all their business transactions, alongside all supporting documents including invoices, receipts, vouchers, and the likes.
At the end of their accounting period, owners must then prepare a statement of accounts comprising profit and loss accounts as well as a balance sheet so that the business income and expenses can be readily determined.
Owners of Sole-Proprietorships and Partnerships can expect to receive a filing notification or an Income Tax Return (Form B or B1 or P) from IRAS by March of each year.
Upon receiving the notification, a 2-line or 4-line Statement needs to be reported for tax filing. The former is required if your revenue is less than S$200,000 for the YA, while the latter is required for businesses whose revenue exceeds S$200,000.
A 2-Line and a 4-Line statement on the Income Tax Return form
In the 2-line Statement, businesses are required to declare their revenue and adjusted profit/loss. Meanwhile, the 4-line Statement will require more information including their revenue, gross profit/loss, allowable business expenses as well as adjusted profit/loss.
Taxes for Companies
Companies are required to file two Corporate Income Tax (CIT) returns annually at different time periods: the Estimated Chargeable Income and Form C-S/C-S (Lite)/C.
1. Estimated Chargeable Income (ECI)
The ECI is an estimate of your company’s taxable profits for a YA. It needs to be filed within three months from the end of the financial year (i.e. if your financial year ends on 31 December 2022, the ECI has to be filed by 31 March 2023).
Companies who qualify for the ECI filing waiver need not file the ECI. This includes companies who meet both requirements of having an annual revenue of S$5 million and below and whose ECI is nil for the YA. In other words, they should not have any taxable profits (calculated by their annual revenue after deducting tax-allowable expenses).
Do note that the ECI filing waiver is based on self-assessment. Your company’s ECI filing status on IRAS’ website may still reflect ‘Ready to File’ even if you qualify for the waiver. According to IRAS, there is no need to seek confirmation or inform them of the waiver as long as both conditions are met.
2. Form C-S/C-S Lite/C
Form C-S/C-S (Lite)/C is a CIT Return for declaration of your company’s actual income. As compared to the ECI, it goes into much deeper detail of your company’s finances. Taking this into account, companies will also have more time to file these forms. The due date for these forms is on 30 November of the YA.
This means that if you were to close your financial year in 2022, the Form will need to be submitted by 30 November 2023.
The three forms differ in level of complexity and each has a different criteria to determine which form a company has to file, depending on their annual revenue and other conditions.
Form C-S and Form C-S (Lite) are applicable for companies that only derive income taxable at the prevailing Corporate Income Tax rate of 17 per cent and are not claiming any of the following in the YA: Carry-back of Current Year Capital Allowances/Losses, Group Relief, Investment Allowance, Foreign Tax Credit and Tax Deducted at Source.
Companies with an annual revenue of $5 million and below will use Form C-S, while companies with an annual revenue of $200k or below will use Form C-S (lite).
All other companies that do not meet the above criteria will need to file Form C.
Submission criteria for Form C-S, Form C-S (Lite) and Form C (Image: IRAS)
Companies eligible for Form C-S and C-S (Lite) need not submit their financial statements and tax computations. The two forms also comprise much fewer fields than Form C, with Form C-S comprising only about half the number of fields to fill in and Form C-S (Lite) with as few as six essential fields to be completed by companies with straightforward tax matters.
How do I file tax returns?
Congratulations! You’ve gotten past the most difficult part of Corporate Tax Income (CIT) filing - understanding it. The next part is a breeze in comparison.
To file the CIT return, you have to first be authorised by your company to act for its CIT matters via Corppass. Thereafter, all you have to do is to log into the MyTax Portal and select the ‘Business Tax’ section. You can then log in via Singpass, select whether you’re filing the ECI or Form C-S/C-S (Lite)/C and follow the instructions on the site.
If you have filed the ECI, you can expect to receive the Notice of Assessment (NOA) within seven days after filing. No NOA will be issued when a nil ECI is filed. If you have filed the Form C-S/C-S (Lite)/C, you can expect to receive the NOA from IRAS by 31 May of the following year. In other words, if you file the Form C-S/C-S (Lite)/C in November 2023, you’ll receive the NOA by May 2024. You are required to pay the tax within one month from the date of the NOA.
Remember: Late filing of the CIT return is an offence and you may be subjected to penalties and/ or summons. So do ensure you file your company’s taxes on time!
Learn more through this GoBusiness page that contains a list of resources and guides on tax filing across different business structures.
This article is accurate as at 25 Sep 2023