Compliance with IRAS Requirements – A Singapore Business Guide

Compliance with IRAS Requirements - A Singapore Business Guide

Compliance with IRAS Requirements – A Singapore Business Guide

According to the Singapore Companies Act, every Singapore Company must file certain reports to relevant government bodies each year. The Inland Revenue Authority of Singapore (IRAS) is the main government agency that levies and collects taxes in Singapore.

Do you have to comply with IRAS? Absolutely yes!

All Singapore companies must follow certain legal obligations every year regardless of their size or business structure. Under the Singapore Companies Act, all locally incorporated companies and all Singapore branches of foreign companies are required to remain compliant with the IRAS all year round. Therefore, both active and dormant companies must fulfil these requirements.

IRAS compliance is a big responsibility and failing to meet the requirements can lead to major consequences. Compared to other countries, Singapore’s obligations are quite straightforward as detailed below.

Estimated Chargeable Income

The IRAS necessitates all companies to report their Estimated Chargeable Income (ECI) for each financial year. By definition, the Estimated Chargeable Income is an approximation of your company’s taxable income for a Year of Assessment (YA). The company has to report the ECI within a period of 3 months from the end of the Financial Year.

This is done by completing and submitting the ECI Form. It is important to note that you must file an ECI regardless of income. If your company did not make any income in a certain financial year, you must file a ‘nil’ ECI.

Advantage of Filing Estimated Chargeable Income

If your company files its ECI early enough, the IRAS usually offers flexible ways of paying tax in instalments. The bottom line is that the earlier you submit the ECI statement for your company, the higher the number of payment instalments you will receive.

For instance, if you file the ECI of your company:

  • By the 26th of the month immediately following the end of the financial year, the IRAS allows you to pay taxes in 10 instalments;  
  • By the 26th of the second month after the end of the financial year, the IRAS allows you to pay taxes in 8 instalments;  
  • By the 26th of the third month after the end of the financial year, the IRAS allows you to pay taxes in 6 instalments.

Income Tax Return

Singapore companies are required to file tax returns as well. The income tax return provides a calculation of the actual tax that your company needs to pay. The filing deadline for corporate income tax return is 30 November for paper filing, or December 15 for e-filing.

You need to submit tax computation (Form C). Filing form C requires your company to attach financial statements, tax computations, detailed profit & loss statement, and other relevant supporting documents.

If you have a smaller company, you must meet certain conditions to file a simplified version of Form C called Form C-S that does not require the abovementioned additional documents. The conditions are:

  • Your company is incorporated in Singapore;
  • Your company has annual revenue of SGD$5 million or less;
  • Your company’s income is taxed at the standard corporate tax rate of 17%; and
  • Your company is not claiming any special schemes such as foreign tax credits or investment allowances.

Singapore follows the “preceding year basis” for taxation. This indicates that you need to file ta returns for your company in the current year based on the profits gained in the preceding year.

A dormant company that does not carry any business and has no income for the financial year can apply for a waiver of income tax return filing. If IRAS grants the waiver, the company does not have to report the estimated income or file the tax return for the financial year.

Submission of Audited or Unaudited Financial Reports

You need to submit either audited or unaudited reports, which include the following:

  • Financial statements, including balance sheets and income statements;
  • Supporting notes and disclosure of significant accounting policies
  • Disclosure of company’s operations; and
  • Shareholders and directors’ interests.

In Singapore, it is compulsory for all companies to appoint an auditor within 3 months of their incorporation unless they are exempted from the audit process. Being exempted from the statutory audit only applies for companies that fall under the category of a “Small Company”.

According to the Singapore Company’s Act, corporations that qualify for the “small company” category must be private companies in the current financial year, and must meet at least two of the following three criteria within the last two consecutive financial years:

  • Total annual revenue of SGD$10 million or less;
  • Total assets of SGD$10 million or less; or
  • 50 employees or less.

Prepare Accounting Records

All Singapore Companies must prepare Accounting Records, which take account of:

  • A Profit and Loss Account;
  • A Balance Sheet;
  • A Cash Flow Statement; and
  • An Equity Statement

According to the Singapore Financial reporting standard (SFRS), the accounting records must be kept for 5 years. The directors of the company are responsible to ensure that the financial statements of the company are prepared accurately and comply with accounting standards.

Failure to Comply with IRAS Requirements

The IRAS gives all companies a 3-month grace period to file their ECI. If the three months elapse and you fail to comply with such requirements, you will be served with a Notice of Assessment (NOA) as per their estimation of your company’s income.

If you don’t agree with IRAS’ estimated assessment, you will have one month from the date of IRAS’ NOA to submit a written objection. Otherwise, the NOA will be recognized as final and irrespective of the differences in the subsequent revenue information declared on Form C and other accounts.

Conclusion

Every Singapore incorporated company must ensure the timely submission of returns and forms with IRAS. It is essential to hire a professional firm to handle such nitty gritties for your business.

Tianlong Services Pte Ltd has the capacity to review all the financial records of your company to ensure that compliance requirements are met and your business is protected from any legal troubles.

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