Singapore is often recognised for having one of the most enticing corporate tax systems in Asia. This is attributed to its affordable tax rates, coupled with an efficient tax filing regime. Singapore demonstrates a leading example of a country that continuously reduces income tax rates and introduces a number of tax incentives to attract and keep foreign investments. The country’s effective tax rates and general business friendliness contribute greatly to its economic growth.
Under the Income Tax Act, all companies with operations in Singapore need to pay corporate tax on chargeable income acquired from Singapore or overseas income remitted into the country. Nonetheless, Singapore tax-resident companies can enjoy several additional tax incentives that non-tax residents aren’t eligible for.
If you run your business operations in Singapore, here are several things you need to know.
What is the corporate tax rate in Singapore?
Singapore has a flat corporate tax rate of 17% on chargeable income. A company’s chargeable income is calculated by subtracting deductible expenses from its taxable revenues.
Taxable revenues refer to any ongoing or recurring income acquired from Singapore or remitted into Singapore. Deductible expenses refer to expenses incurred for the production of income – in essence, the company must be able to prove why the expense was necessary to earn income.
What tax forms need to be filed yearly?
Companies need to submit two corporate tax forms to IRAS every year:
1. Estimated Chargeable Income (ECI), which provides an estimate of the company’s chargeable income within three months of the end of their financial year. All companies are required to file an ECI unless its revenue is not more than $5 million and there isn’t any estimated chargeable income for that Year of Assessment (YA).
2. Corporate Income Tax Return, also known as Form C or Form C-S, except for inactive companies for which IRAS has waived their requirement to file.
When does corporate tax need to be filed by?
All essential tax documents are required to be filed yearly by 15 December for online filing and 30 November for hardcopy forms. With effect from YA 2020, physical filing will be phased out – so companies will have to e-file their documents.
Filing corporate tax beyond the stipulated deadlines may lead to a 5% penalty, with subsequent 1% penalties for each month the tax remains unpaid (up to a 12% penalty in total). IRAS may also take legal action or further enforcements to retrieve the unpaid tax.
To ensure that your corporate taxes are filed on time, you can engage the assistance of a tax service provider in Singapore. At Ackenting Group, our experienced team hold the expertise to provide an extensive range of corporate advisory and accounting services to manage your company’s financial needs and obligations.
Claiming of capital allowances
Generally, a company can claim their capital allowances by way of tax reductions, in order to cover the expense of any equipment or machinery purchased for business purposes. The amount of claimable capital allowances is calculated as the price incurred for the asset divided by the number of years it takes to pay it off.
As a rule of thumb, computers, automated equipment and assets that cost up to $5,000 can be written off within a year, while other assets eligible for capital allowances can be written off over three years.
Any capital allowances that are left unutilised may be carried forward to following YAs for an indefinite period of time, as long as there aren’t any significant changes in the company’s shareholdings or core business activities.
Conclusion
Corporate tax in Singapore is an attractive factor for businesses, but it’s important to file them promptly and accurately to avoid incurring extra charges. As an award-winning accounting and audit firm in Singapore, we have the relevant knowledge to handle your company’s taxes, as well as advise you on tax incentives that can bring you even greater savings.
If you require any assistance on accounting services, feel free to drop us an email at johnwoo@ag-singapore.com or contact us at +65-66358767. At Ackenting Group, we offer a complimentary 30 minutes online consultation for us to better understand your business requirements.
