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Why Understanding Corporate Tax is Important for Businesses

Last modified: August 31, 2023
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Why Understanding Corporate Tax is Important for Businesses

If you are starting a new Singapore company, you must know “What is corporate tax?” It will help you ensure your compliance. It will enhance your brand image. However, paying corporate tax will burn a hole in your pocket.

On the other hand, you also need to understand that you can save your hard-earned money by being smart. Yes, it is true! Many Singapore business owners successfully minimise their corporate tax amount by hiring the best corporate tax services in Singapore.


What is Corporate Tax in Singapore?

Singapore corporate tax is a tax levied on your company’s profits or net income. You must pay it on your business’s taxable income, which is its revenue after deductions.

You can calculate your deductions by considering the cost of goods sold, research & development, depreciation, petty and administrative expenses, expenses on selling and marketing campaigns, Etc.


Benefits of Corporate Tax Service

Calculating the tax amount you owe to IRAS is a complex task. The process starts with bookkeeping, where you file receipts, bills, and invoices and record even the tiniest financial transactions. Next, you account for your records and verify them during auditing.

In addition, the tax laws keep on changing. You have to take a break from growing your business and learn the changes and their implications for your business.

If you are not updated, you are bound to make a mistake in your tax filing. It is harmful. It can get you fined or penalised. You may also have to explain this to the authorities.

1. The Truth about Do-It-Yourself Corporate Tax Filing

Business owners, who try to do it independently and save money, know how difficult it is to file corporate tax.

The also task occupies you. It claims your valuable time, mental focus, and efforts. It can lead to stress. It also distracts you from growing your business.

However, to pull the task off, you must know what corporate tax is and all the concepts and principles involved. Many times, these owners tend to pay more in corporate tax than they actually owe just to be on the safe side of IRAS.


2. Access to a Team of Experts

On the other hand, a provider of corporate tax services in Singapore can do a clinically elegant job of it. They employ experts in bookkeeping, accounting, auditing, and tax consulting. These experts do their bits to ensure your compliance and save you money in taxes legally.


3. Pay Minimum Corporate Tax Legally

Their tax consultants are updated with the latest changes in Singapore tax laws. They also know tax exemptions and benefits schemes like:

  • Tax exemption scheme for new startups
  • Partial tax exemption scheme
  • Foreign tax credit
  • Avoidance of Double Taxation Agreements

They also know how to maximise tax benefits on:

  • Singapore-sourced income
  • Foreign-sourced income from dividends
  • Foreign branch profits
  • Foreign-sourced service income

Corporate tax services Singapore claim all the tax benefits, reliefs, and exemptions they can for you. They use their experience and knowledge to keep your tax amount to a minimum.

Meanwhile, you stay entirely free to run your business without any hassle or stress that comes out of trying to comply with the strict ACRA and IRAS regulations.

It is why the smart move is to hire these experts and get the benefits of corporate tax services. They take care of your task without you knowing, “What is corporate tax?” Or “How and where to file it?”


4. Avoid Fines and Penalties

Keeping records and generating financial documents play an essential part in accurate corporate tax filing. However, it is a painstaking, time-intensive task, especially when you are short-handed or inexperienced.

And tax compliance is a job for the experts. You don’t want to hear from the IRAS too often. It is where corporate tax services Singapore can help you. They help you file your taxes within the deadline, one month from the IRAS’s Notice of Assessment date.

They know how to analyse and interpret your financial data and generate reports for you to present to the AGM and authorities. They have the experience to execute your tax compliance to perfection. They keep you bright and shiny in the eyes of the tax authorities.


Tax Benefits

Singapore supports its Small and Medium Enterprises by providing grants and schemes. Schemes like Productivity Solutions Grant, Enterprise Development Grant and Double Tax Deduction for Internationalisation help them to manage their mounting overhead costs.

Your corporate tax services firm tries to reduce your tax amount legally by claiming tax benefits, rebates, exemptions, grants, and incentives. So, even though the corporate tax is charged at a flat rate of 17%, your effective tax comes to about 8.5%-9.5%.

If the tax amount mentioned in the Notice of Assessment is higher than it should be, they appeal to authorities. If it is true, then the IRAS will refund the excess amount to you.

Data Preparation

How difficult is it to file corporate tax? Well, it is not a big deal if you have the time, experience, and latest knowledge. However, submitting inaccurate data can harm your tax compliance. Data compilation and preparation can stress out your staff from the financial department.

Corporate tax services in Singapore go through your yearly financial records. They know how to sort, compile, and structure the data for submission. It is a complex and time-consuming task.

After compiling and collating your financial data, they process it to prepare annual returns, claim tax benefits and tax filing.

They know your data intimately and can draw financial insights from it to advise you on saving tax. Your staff gets to use the saved time for preparing the next budget or forecast.


Reduced Errors

Letting an inexperienced person handle your tax filing data is not a safe alternative. It may end up in incorrect data compilation. It will double your efforts and may delay or eliminate any refunds or tax returns legally due to you.

Common tax mistakes are due to errors in mathematical calculations, posting payments on the wrong line or errors in calculations at the time of determining your taxable income or amount.

One of the main benefits of corporate tax services is that they provide you with accurate data. Their experts have the experience, knowledge, and training to treat data as per the latest changes in tax laws. They successfully reduce the common mistakes in your tax returns and ensure that you are not asked to audit your books. They help you avoid tax omissions, legal actions and penalties.

What is corporate tax? Well, it is a complex topic needing deep study. In practice, every Singapore company with taxable income has to pay the tax within the deadline. Hiring corporate tax services in Singapore is a smart move that can save you time, effort, and in the long run, money.

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