How to Calculate Taxable Income for Singapore Companies
When it is time for annual filing, new owners often search for information on how to calculate taxable income for their Singapore companies. Corporate tax Singapore is levied on chargeable income at a flat rate of 17%. Before you start worrying about it, get a clear-cut idea about items that are deductible & that you must present for taxing.
Singapore has adopted the territorial tax system. It means your company must pay corporate income tax on its overseas income received in Singapore or on income derived from or accrued in Singapore. Your company’s income earned outside Singapore may be of the following nature:
- Business or trade profits
- Yield from company investments
- Income through premiums, copyrights, patents, & trademarks
- Gains that can be classified as income
Calculating Singapore Company’s Taxable Income
Before you start to prepare tax computation for your company, try answering a few questions. It will help you immensely in knowing, “How to reduce corporate tax in Singapore?”
It is a vital step before you tackle the Form C-S/ C.
- If you are filing Form C then you must submit it along with company’s tax computation, audited/unaudited statements and schedules to IRAS.
- If you are filing Form C-S then you must submit it with company’s tax computation, financial statements, and schedules to IRAS upon request.
Should you pay tax on your business’ net income? Is its taxable income different than its net income? To calculate your company’s corporate income tax, you have to differentiate its taxable income from its net income.
If you use accounting software to update business’ financial transactions regularly, then the calculating taxable income of your Singapore company won’t be a big task. Start by sifting through company’s accounts for its net profit/ loss figures.
Effect adjustments and accommodate company expenses that are not tax-deductible. And, you will arrive at its taxable income for the year of assessment.
These adjustments should also accommodate company income that is, depending on its source, taxable or not. In short, these adjustments cover non-deductible expenses, non-taxable receipts, other deductions & capital allowances.
Type of Adjustments
The following list gives you an idea about the type of adjustments that you may have to make to your net profit/loss:
- Deduct untaxable income
- Deduct non-trade income or investment income arising from interest, dividend & rental
- Add disallowable company expenses
- Add direct expenses related to the investment income
- Add net investment income like interest, dividend & rental
- Deduct Section 14Q deduction for expenses (on renovation or refurbishment)
- Claim deduction under Productivity and Innovation Credit (PIC) scheme
- Deduct unutilised capital allowances from last Year of Assessment
- Deduct capital allowances under PIC scheme for the current YA if you are claiming capital allowances on fixed assets
- Deduct unutilised losses from previous YA
- Deduct unutilised donations from previous YA
- Deduct donations to Institutions of a Public Character
Paying Corporate Tax Singapore
You need to file company income tax Singapore each year by:
- 15 December (Online filing); or
- 30 November (Paper filing)
Estimated Chargeable Income (ECI): The process starts by filing an ECI form. You provide an estimate of the company’s chargeable income to IRAS.
Income Tax Return: Use Form C/C-S to file your company’s income tax return and report its actual income to IRAS. You need to file it even the company is making losses or being struck off.
Notice of Assessment (NOA): The officials at IRAS will review the forms and will send an NOA to your company by 31 May of the next year. Go through the tax liabilities detailed in the NOA and object, if it is needed.
Pay your tax within 30 days after receiving NOA to your company. You could pay using company’s GIRO, net banking, or cheque.
Singapore authorities run a liberal taxation system. However, they frown up on non-compliance by a company. It is the reason why you should calculate your company’s taxable income and pay it before the due date.