All you need to know about corporate tax filing for small business in Singapore
There are a few moments in a business owner’s life where time and knowledge are of the utmost essence, and undoubtedly, one of those moments is tax season.
Filing taxes correctly is something that makes even seasoned veterans break a sweat; it isn’t shocking then that this can be particularly nerve-wracking for small business owners.
However, using an innovative expense management software that streamlines your accounting can take out the tension from corporate tax filing.
If you’re keen on learning everything about small business tax filing and wish to breeze through the complexities of tax season, then our beginner’s guide is the perfect weapon in your arsenal!
Read on to know more about the intricacies involved in filing small business corporation taxes in Singapore.
What are small business taxes?
As a small business owner, all the money you earned in a particular year is taxed by the government, regulated by the Inland Revenue Authority of Singapore (IRAS).
From a solopreneur to an owner of an SME with a small team, all sorts of small businesses have to pay these taxes.
It is even more important to know that small businesses are heavily inspected over their corporate tax filing as opposed to big corporations since SME owners are more prone to tax evasion or incorrect tax filing.
Taxes for small businesses differ greatly from structure to structure, income levels, and more.
What type of small businesses are required to file taxes in Singapore?
Being aware of your business structure makes it easier to acquire relevant forms and keep yourself updated with the necessary laws and regulations.
Broadly speaking, there are 3 types of small business organizations required to file taxes.
1. Private Limited Company
It is the most advanced, flexible, and scalable type of business form in Singapore, and refers to a form of Limited Liability Company (LLC) in which the shares are held by less than 50 persons and are not available to the general public.
Most privately incorporated businesses in Singapore are registered as private limited companies.
2. Sole Proprietorship
Considered one of the riskiest forms of business in Singapore, a sole proprietorship is not a separately incorporated entity, and therefore the owner and the business are the same.
The owner personally owns all assets and liabilities of the business.
3. Partnership
At least two or more people join together to co-own a business in a partnership.
A partnership firm has no legal existence separate from its partners. It comes to an end with death, insolvency, incapacity, or the retirement of a partner.
Why is small business tax filing important?
Business owners already deal with a lot on their plate on a day-to-day basis. And keeping track of different business tax filing deadlines can add to the burden.
Even so, filing your taxes is crucial. Tax evasion is an illegal and serious crime, and can adversely affect your business as well as personal life.
There are monetary and legal repercussions for missing out or misreporting business tax filing.
Not only that, your business can face an audit, which is extremely time-consuming, sometimes lasting for months.
Audits are also expensive, forcing you to invest your capital in hiring attorneys, Certified Public Accountants (CPAs), etc.
A government-issued audit impacts negatively on a company’s reputation, and by extension, the owner’s reputation as well.
What type of taxes do small businesses have to pay in Singapore?
As mentioned above, small business taxes differ vastly in terms of structure, employee strength, revenue levels, etc.
Fortunately, Singapore offers some of the lowest effective tax rates in the world.
Here are examples of some types of IRAS taxes Singaporean small business owners have to keep in mind.
These values are subject to amendment as per the Singaporean government. Therefore, be sure to regularly check the tax relevant to your business.
IRAS taxes for small business owners
- Corporate Tax
- Branch Tax
- Income Tax
- Withholding Tax (Dividends, Interests, Royalties)
- GST
- Foreign-Sourced Income Tax
Steps to file business tax returns in Singapore
After thorough research on which taxes apply to your business, it is now time to file your tax return.
Follow these steps to ensure a timely and organized tax filing process without breaking a sweat.
1. Keep your financial records and documents in order
Organizing is of paramount importance during tax season.
Ensure that all your financial records and documents are available and easily accessible by you.
Here’s a brief list of financial essentials you should prepare in advance throughout the fiscal year:
• Taxpayer ID number
• Bank account & Credit card statements
• Your previous year's company tax return
• Relevant accounting information needed for accurate filing
To know more about the record-keeping requirements in detail for GST and Non-GST registered companies, view the IRAS Record Keeping Requirements page for a detailed checklist.
Manually organizing these records can pose to become problematic for you, considering the huge flow of transactions and statements floating around throughout the year.
To simplify and streamline your tax filing process, consider investing in an automated expense management system like Volopay that can help you achieve a hassle-free tax season.
2. Know your small business tax deductions
Having a good knowledge of all the tax write-offs you can claim during filing can be a huge relief from paying exorbitant amounts of taxes.
Although these deductions are subject to the type of company you have and the industry it belongs to, here are some common tax deductions you can claim to save money:
• Office/commercial space rent
• Office supplies, machinery, and equipment
• Business-related insurance
• Business meals (for eg., client lunches, etc.)
• Vehicle and vehicle-related expenses
An organized overview of your spending allows you to easily pinpoint company write-offs.
As a business owner, it is prudent to be well-versed not only in what you owe in taxes but also in ways you can save your business income.
Read IRAS's extensive list of taxable and non-taxable income, deductions, and reliefs here.
3. Know your business tax return forms and the laws
Different business structures require different business tax return forms and adherence to laws made specifically for relevant business entities.
Therefore, be fully familiar with the forms needed for your business organization.
Form C-S/ Form C-S (Lite)/ Form C:
These are Corporate Income Tax Return forms for your company to declare its actual income.
Whilst Form C must be filed by all companies, Form C-S (Lite) is to be filled by Singapore-incorporated companies with annual revenue of $200,000 or below.
Form C-S is filled by companies with an annual turnover of $5 million or below.
Visit IRAS Corporate Income Tax Return page to get the necessary forms for your business.
Estimated Chargeable Income (ECI):
All Singapore companies are required to declare the revenue amount and Estimated Chargeable Income (ECI) by filing the ECI form with the Inland Revenue Authority of Singapore (IRAS) within 3 months of the financial year end for the company.
Even if the company estimates its chargeable income as zero, it still has to file a “Nil” ECI.
You can access the IRAS ECI Filing page for more information.
4. File your business taxes by the correct deadline
Each Singapore company must file its annual tax return with IRAS by November 30.
Singapore adopts the preceding year’s basis for taxation. The profits for the financial year ending in the preceding year will form the basis for filing the tax return in the current year.
The implications of not filing for an extension and missing the deadline can become a big dent in your company’s finances and your reputation: penalties can be in the form of fines of up to $50,000 or imprisonment of up to 5 years.
Therefore, make sure you adhere to the guidelines and keep documentation up to date and ready to avoid any delay.
What are the benefits of regularly filing your business taxes?
Waiting for your business tax due date can be a grave mistake.
Not only does this create an extremely pressured environment come tax season, but it also makes your company prone to filing incorrect taxes.
Incorrect tax filing can result in penalties since it can be misconstrued as tax evasion.
Therefore, it is considered good financial planning to file quarterly estimated taxes. Here’s why:
Avoid penalties
Trust us when we say this, tax penalties in Singapore are no joke! In case you severely underpay without intending to evade tax, you could still be prosecuted for up to 3 years in imprisonment.
Therefore, it is wise to always overestimate your quarterly taxes by up to 5% as a precaution.
In case you overpay, the government will pay you back the extra money you gave.
Better financial planning and budgeting
Instead of a lump-sum deduction towards the end of a financial year, paying as you go every quarter is a better financial decision.
It also helps you make fewer tax-related mistakes since paying smaller portions leads to better in-depth analysis.
By accounting for a tax estimate every quarter, you can prepare a thorough quarterly budget and optimize your spending.
Cashflow management
Cash flow is the lifeblood of your business. You need it to cover daily operational expenses, your employees’ payroll, and also your taxes.
By breaking up your tax lump sum into 4 smaller quarterly amounts, you easily assess the cash flow you will require for the entire financial year without encountering any incorrect tax filing.
Of course, a systematic tax filing system relies heavily on an organized database for all your transactions and accounting processes.
For that and so much more, an automated spend management software like Volopay can make your tax season tension-free and effortless.
Suggested read: 7 MOM approved payroll software for businesses in Singapore
How to calculate business tax payments?
To calculate your business tax payments, you have to take into account all the tax adjustments applied to the profit to finalize the income that can be taxed.
These tax adjustments include non-deductible expenses, non-taxable receipts, further deductions, etc.
Visit the IRAS Tax Computation page to learn about more tax adjustments to consider when filling out Form C.
To calculate the tax estimate, use this Basic Corporate Income Tax Calculator.
Want to calculate industry-specific business tax in Singapore? Check out these template guides.
How automated expense management software can help in filing small business taxes?
Compiling transactions and corroborating bank and credit card statements is a tedious task when done manually.
Armed with an automated expense management software, you can organize and categorize all your business expenses as per employee, department, and even projects, conveniently accessible to regularly update your tax information every quarter.
Volopay prepares you for the dreaded tax season like no other platform. With Volopay, you can keep meticulous records by uploading receipts onto a centralized database for all your business expenses.
Whether it’s a corporate card expense or vendor payout, all your transactions are systematically organized on a cloud so that you can access it for effortless bookkeeping and audit purposes.
Speaking of bookkeeping, Volopay seamlessly integrates with any existing accounting software in real-time, eliminating the need to manually enter data from one platform to another.
With less manual tax filing burden to bear, you can focus your financial team’s energy on finding more tax-saving avenues than ever before.
With Volopay, you get access to robust, real-time, and detailed spend analytics data and insights into overspending, allowing you to control your expenses and make more informed business decisions.
The information provided in this article doesn't constitute legal or fiscal advice and is for general instructional purposes only. Please check with an attorney or financial counsel to gain advice with respect to the content of this article.