7 Financial Thresholds Small Businesses Need To Know For Tax Reporting In Singapore

Tax season can be a stressful period for many business owners, especially the small businesses which do not have their own in-house accountants. While it is helpful and sometimes essential to enlist the services of professionals, business owners should have some basic knowledge about the tax reporting requirements for their business.

Here are 7 financial thresholds small businesses need to know for tax reporting in Singapore.

Read Also: Corporate Income Tax Filing YA2021: 6 Ways to Handle Your Company’s Tax Matters Effectively

7 Financial Thresholds For SMEs in Singapore

You can read on for more details on the financial thresholds.

$100,000 Of Normal Chargeable Income – Tax Exemption For New Start-Up Companies

Singapore has a tax exemption scheme to support new start-up companies.

From the Year of Assessment (YA) 2020 onwards, new start-up companies would qualify for a 75% exemption on their first $100,000 of normal chargeable income and another 50% exemption on the next $100,000 of normal chargeable income. This applies to the first 3 consecutive YAs. After which, from the 4th YA onwards, you can enjoy partial tax exemption.

For example, a company is started in 2020 and qualifies for the tax exemption for new start-up companies. The company follows the calendar year for its YA, thus its first year of YA is YA 2021. The company earned $200,000 during YA 2021. Under the tax exemption scheme, the company would only need to pay $12,750 of corporate tax, instead of the full $34,000.

Chargeable income before exempt amount$200,000
Less: Exempt amount$125,000 (75% of first $100,000 = $75,000 and 50% of next $100,000 = $50,000)
Chargeable income after exempt amount$75,000
Tax payable @ 17% corporate tax$12,750

To be eligible for this tax exemption scheme, the new start-up company must be

  • incorporated in Singapore,
  • be a tax resident of Singapore for that YA
  • have its total share capital held by no more than 20 shareholders during the period of the YA where all shareholders are individuals or at least one shareholder is an individual holding at least 10% of the issued ordinary shares.

The company’s principal activity cannot be that of investment holding or undertake property development for sale, investment or both.

$200,000 Of Normal Chargeable Income – Partial Tax Exemption For Companies

All companies, including companies limited by guarantee, are eligible for partial tax exemption, unless you are claiming the tax exemption for new start-up companies.

From the Year of Assessment (YA) 2020 onwards, this is a 75% exemption on your first $10,000 of normal chargeable income and another 50% exemption on the next $190,000 of normal chargeable income. The maximum exemption for each YA is $102,500.

Chargeable income after the first $200,000 is taxed at the normal 17% corporate tax without any exemption.

For example, a company earns $300,000 in YA2021 and does not qualify for the tax exemption for new start-up companies. You would qualify for the Partial Tax Exemption For Companies for your first $200,000 of chargeable income. They would pay $33,575 of corporate tax, instead of $51,000.

Chargeable income before exempt amount$300,000
Less: Exempt amount$102,500 (75% of first $10,000 = $7,500 and 50% of next $190,000 = $95,000)
Chargeable income after exempt amount$197,500
Tax payable @ 17% corporate tax$33,575

$200,000 Annual Revenue – Simplified Record Keeping For Sole Proprietorship and Partnerships

In order to make record keeping easier for small businesses, IRAS has simplified record keeping requirements (SRK). Under the SRK, qualifying small businesses only need to keep business records (e.g. registers, listings) and not source documents such as receipts and invoices.

To qualify for simplified record keeping (SRK), the business must be a sole-proprietorship or partnership that is not GST-registered and not in the business of investment holding or property development. The business’ annual revenue must be less than $200,000 for the past two financial years and the business’ assets amounted to less than $100,000 as at the end of the latest financial year.

Note: the threshold for annual revenue was formerly $100,000 prior to 1 January 2020 (i.e. YA 2021).

Read Also: Guide On How To File Your Income Tax As A Partnership, Limited Liability Partnership (LLP) Or Limited Partnership (LP)

$200,000 Annual Revenue – 2-Line Statement For Sole Proprietorships

IRAS requires business income for Sole Proprietorships to be reported using a 2-line or 4-line statement.

For businesses with annual revenue of $200,000 or less, a 2-line statement (comprising revenue and adjusted profit) is required.

For example, a tuition teacher earning $40,000 a year can report her income using the 2-line statement. Assuming her expenses is $10,000, her adjusted profit would be $30,000.

Adjusted Profit$30,000

For businesses above $200,000 revenue, a 4-line statement (comprising revenue, gross profit, allowable business expenses and adjusted profit/loss) is required.

Note: the threshold for annual revenue was formerly $100,000 prior to 1 January 2020 (i.e. YA 2021).

$200,000 Annual Revenue – Form C-S (Lite) For Companies

For companies, a simplified Corporate Income Tax Return – Form C-S (Lite) is available to small companies with straightforward tax matters. Those eligible for C-S (Lite) only need to fill up six essential fields, such as revenue and adjusted profit or loss. You are not required to submit financial statements and tax computations, though these should be prepared and submitted if requested by IRAS.

To qualify, the company needs to qualify for Form C-S and have annual revenue of $200,000 and below. The company only derives income taxable at the prevailing Corporate Income Tax rate of 17% and is not claiming in the YA: carry-back of current year capital allowances/ losses, group relief, investment allowance or foreign tax credit and tax deducted at source.

$500,000 Annual Revenue – Certified Statement Of Accounts For Sole Proprietorships And Partnerships

If a Sole Proprietorship or Partnership’s annual revenue is $500,000 and above, you would be required to prepare certified statement of accounts and keep proper records of your business transactions.

“Certified” means signed by the sole-proprietor of the business or precedent partner, indicating that the accounts are true and correct.

Additionally, you would be required to report the details Fixed Assets Purchased/ Disposed Of During the Business Accounting Period for claiming Capital Allowances.

IRAS provides samples of the necessary Profit & Loss Account and Balance Sheet documents on their website.

$1 Million Taxable Turnover – Register For Goods And Services Tax (GST)

All businesses in Singapore (including sole proprietorships) must register for GST if your taxable turnover is more than $1 million at the end of any calendar year (from 2019 onwards). If at any time, you reasonably expect your taxable turnover in the next 12 months to be more than $1 million, you will also have to register for GST. This can be done under two instances.

#1 Retrospective view: From 1 January 2019, businesses in Singapore have to register for GST if your taxable turnover exceeds $1 million in the calendar year. You can use IRAS’ Tax Registration Calculator (from 2019) to help you in this assessment.

#2 Prospective view: Businesses that forecast a taxable turnover to go beyond $1 million in the next 12 months will also have to register for GST. To become GST-registered, you must also show supporting documents such as 

  • Signed contracts or agreements
  • Accepted quotations and signed purchase orders
  • Invoices to customers with fixed month fees
  • Income statement on past 12 months showing turnover already close to $1 million, and on an increasing trend

GST registration is mandatory. Businesses must apply for your GST registration within 30 days from the date your liability to register arose. There are certain circumstances when exemptions may apply. Businesses may also voluntarily register for GST before they are required to, even when they have not met the $1 million threshold.

Read Also: When Must A Company Register For GST, And How You Can Register?

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