Crash Course in Singapore's Income Taxation (2023)
As the deadline for filing and paying income taxes is fast approaching there will be a plethora of tax vocabularies and computation that will come along your way. Most may confuse you and may hinder your understanding of your taxes and the benefits you can enjoy. This article summarises all the essentials you need to know regarding individual and corporate income tax this 2023.
I. Individual Income Tax
Who is required to pay Individual Income Tax?
The following are required to pay individual income tax:
- Individuals who earned more than 22,000 SGD during the preceding calendar year
- Self-employed individuals with a net profit of more than 6000 SGD; or
- A non-resident individual who derived income in Singapore during the previous calendar year
What is the Process in Filing and Paying Individual Income Tax?
Filing and Paying Individual Income Tax in Singapore follows the below easy steps.
A Notice of Assessment (NOA) is the tax bill computed by Inland Revenue Authority of Singapore (IRAS) based on the tax form(s) that you have submitted and/or information sent by organisations participating in the Auto-Inclusion Scheme.
You will receive an SMS/email notification once your tax bill is finalised and ready for viewing online, if you have updated your mobile number/email address with IRAS.
II. Corporate Income Taxes
Corporate entities operating and/or deriving income in Singapore are taxed based on the Chargeable Income which refers to the total income less expenses, capital allowances, donations, and losses incurred during the previous calendar year. Corporate Income Tax is computed at 17% against the actual chargeable income earned by a firm during the preceding calendar year.
The filing and payment of corporate income taxes are categorised in a two-cycle scheme. The first is the declaration, and payment of the estimated chargeable income of a firm and the second is the final revenue computation and filing. The former is known as the Estimated Chargeable Income (ECI), and the latter is the completion of Form C/C-S to be e-filed to IRAS every 30 November.
What is ECI?
Estimated Chargeable Income (ECI) is computed for IRAS to track and monitor the financial health of firms and release estimated tax payables.
Who is required to file ECI?
All companies are required to file ECI on certain exceptions as detailed below:
- A Singapore-operating company that meets both criteria:
- Annual Revenue is 5M SGD and below for the financial year; and
- ECI is non-existent before deducting partial exemption scheme (if there’s any) or tax exemption scheme for new start-up companies
- Entities specifically not required to file ECI
- Foreign ship owners or charterers whose local shipping agent has submitted/ will submit the Shipping Return
- Foreign universities
- Designated unit trusts and approved CPF unit trusts
- Real estate investment trusts that have been granted the tax treatment under Section 43(2) of the Income Tax Act 1947
- Cases specifically granted the waiver from filing by IRAS
When should an ECI be filed?
ECI should be filed within 3 months from the end of the firm’s financial year. Filing early may subject a firm to a given number of instalments.
What is Form C/C-S?
Form C/C-S is accomplished for Singapore operating firms to declare their actual income earned for the preceding calendar year.
Who needs to file C/C-S Form?
Unlike ECI, all firms regardless of financial standing and exemptions are required to file for the forms unless the company has been granted a waiver. All firms can file a C Form. But companies with annual revenue of $5 million or below can opt for a form C-S, and those with annual revenue of $200,000 or below can file C-S lite instead which in comparison to C-form has fewer fields to be filled. Firms who file Form C-S and C-S lite are not required to submit financial statements and tax computations.
IRAS has designed a comprehensive table to better portray the right form for your firm to be used. You can check this and more resources in this link.
How can I pay my taxes based on my ECI and/or the Actual Corporate Chargeable Income?
IRAS referring to the disclosed estimated revenue on the ECI filed will then release a notice of assessment to be paid within 1 month from the date of the receipt of NOA.
The same will apply to the Actual Revenue Computation based on Form C/C-S filed.
In case of a bigger computed ECI in comparison to the Chargeable Income filed in Form C/C-S, automatic refunds will be credited to the firms account via GIRO, Telegraphic Transfer, or Pay Now. Tax credits not refunded within 30 days may earn the firm some interest.
The details summarised here are the essentials and only cover the most common tax type every Singapore national or entity would encounter on a regular basis. As complex in nature as taxes go, there is a long list of exemptions, computations, and validation that you need to understand and get your hands on.
In addition, Finance and Deputy Prime Minister Lawrence Wong’s budget speech has laid-out changes in the current tax system, existing reliefs, and benefits. Read the comprehensive summary prepared by one of Helmi Talib Group’s Tax Directors, Audrey Ong here.
To ascertain accurate filing, and ensure you enjoy the right exemptions and reliefs due to you, you can also consult with tax agents and experts who would do the taxing process on your behalf. Our team has more than decades of combined experience in Singapore tax and more. Get in touch with us to get expert advice and assistance during this Tax season and the next.
On top of Income Tax, there’s also the Withholding Tax, Property Tax, Goods and Services Tax (GST), Stamp Duties and more of great importance that our team can assist you with, may it be for your individual or corporate needs.
All materials have been prepared for general information purposes only. The information presented in this document is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice. Professional advisory should be sought before taking or refraining from any action as a result of the contents of this document.