Overview of Corporate Income Tax in Singapore
Tax terminology and concepts are infamously hard to grasp, and it takes years of practice before accountants can achieve expertise in this area. Taxation is an annual exercise, and even in-house accountants are not necessarily familiar with the basic concepts because they simply lack the opportunity to practice and hone their skills. As tax expenses eat into a considerable portion of a company’s profit, and also because tax computation errors will attract penalties from Inland Revenue Authority of Singapore (IRAS), it is important to understand the common tax terms and get your basic concepts right. In this blog post, we provide you with an overview of corporate income tax in Singapore, and the common terms that you need to know:
General Rule for All Companies
In Singapore, a company is taxed on the income earned in the previous financial year i.e. income earned in the financial year 2019 will be taxed in 2020.
Basic Period and Year Of Assessment
Using the same example as above, 2020 is the Year of Assessment (YA) i.e. your income is brought to tax in the relevant YA.
The "basis period" is the financial year wherein the income is subject to tax. It is usually the 12-month period before the YA.
Examples Based on Different Financial Year Ends
| Financial Year End | Basis Period | YA |
|---|---|---|
| 31 Mar of each year | 1 Apr 2018 - 31 Mar 2019 | 2020 |
| 30 Jun of each year | 1 Jul 2018 to 30 Jun 2019 | 2020 |
| 31 Dec of each year | 1 Jan 2019 - 31 Dec 2019 | 2020 |
The same rule applies to new companies.
Attribution of Profits/ Losses for New Companies
The first financial period of new companies may span over 12 months. In such instances, the profits or losses must be apportioned and attributed to two different YAs.
Whenever possible, the company should identify the income earned and expenses incurred for each of the two YAs, based on the actual dates the income was earned and the expenses were incurred. If this is not possible, time apportionment can be applied (i.e. apportion based on number of days in the corresponding YAs).
Example
| Date of Incorporation | 15 Apr 2019 |
| Financial Year End | 30 Jun every year |
| Accounts Closed on | 30 Jun 2020 |
| Revenue | $100,000 |
| Expenses | $50,000 |
| 1st YA | 2020 |
| Basis Period for 1st YA | 15 Apr 2019 to 30 Jun 2019 |
| Revenue for 1st YA | ($100,000/442 days)*77 days |
| Expenses for 1st YA | ($50,000/442 days)*77 days |
| 2nd YA | 2021 |
| Basis Period for 2nd YA | 1 Jul 2019 - 30 Jun 2020 |
| Revenue for 2nd YA | ($100,000/442 days)*365 days |
| Expenses for 2nd YA | ($50,000/442 days)*365 days |
Corporate Tax Rate
The corporate tax rate is 17% (for both local and foreign company) from YA 2010.
Annual Tax Filing Obligations
Estimated Chargeable Income (ECI)
All companies are required to submit ECI within three months of the company’s financial year end, except if it belongs to certain entities that are not required to file ECI or when it meets the following criteria:
Annual revenue is not more than $5 million for the financial year; and
ECI* is NIL for the YA (* The ECI should be the amount before deducting the exempt amount under the partial tax exemption scheme or the tax exemption scheme for new start-up companies.)
Form C-S/C-S Lite/C
All companies are required to file Form C-S/C-S Lite/C with IRAS by 30 November each year except dormant companies which have applied and been granted waiver to submit income tax return.
Form C-S
From YA 2017, companies will qualify to file Form C-S if they meet all of the following conditions:
The company must be incorporated in Singapore;
The company must have an annual revenue of $5 million or below
The company only derives income taxable at the prevailing corporate tax rate of 17%2; and
The company is not claiming any of the following in the YA:
Carry-back of Current Year Capital Allowances/ Losses
Group Relief
Investment Allowance
Foreign Tax Credit and Tax Deducted at Source
For more details on how to e-File Form C-S, please refer to Tips on e-Filing Form C-S.
Form C-S Lite (Simplified version of Form C-S)
Companies have the option to file Form C-S (Lite) if they qualify to file Form C-S and have an annual revenue of $200,000 or below. Click here to find out more about Form C-S (Lite).
Form C
You must file Form C (together with financial statements, tax computation and supporting schedules) if your company does not qualify to file Form C-S. For more details on how to e-File Form C, please refer to Tips on e-Filing Form C.
Dormant Companies
If your company does not carry on business and has no income for the whole of the basis period, it is considered a dormant company.
However, you are still required to e-File your Income Tax Return (Form C-S/C for Dormant Company) for your dormant company, unless the company has been granted waiver of Income Tax Return Submission.
Speak to your accountant
We understand that keeping track of tax matters on top of managing your daily business operations can be overwhelming at times. If you have any queries, feel free to drop us a message or email us and let us know how we can assist you. Our general response time is one business day.
The above article is written based on information from IRAS website accessed on 12 June 2021.
