Tax Compliance for Small Businesses in Singapore

As a small business owner in Singapore, understanding and complying with tax regulations is crucial for maintaining financial health and avoiding penalties. This guide will delve into the key aspects of tax compliance, covering corporate income tax, Goods and Services Tax (GST), record keeping, and more.

Corporate Income Tax

Corporate income tax in Singapore is levied on the profits of companies. The tax rate is 17% for most companies, but there are incentives to encourage the growth of small businesses:

  • Partial Tax Exemption Scheme: This scheme provides a partial exemption on the first $300,000 of normal chargeable income. The exemption is as follows:
    • 75% exemption on the first $100,000 of normal chargeable income.
    • 50% exemption on the next $100,000 of normal chargeable income.
    • The remaining $100,000 is taxed at the normal corporate tax rate.
  • Full Tax Exemption Scheme: Newly incorporated companies may qualify for a full exemption on the first $100,000 of normal chargeable income, subject to certain conditions:
    • The company must be incorporated in Singapore.
    • The company must be a tax resident in Singapore for that year of assessment.
    • The company must have no more than 20 shareholders throughout the basis period for that year of assessment.
    • All shareholders must be individuals or at least one shareholder must be an individual holding at least 10% of the total number of issued shares.

For more details on corporate income tax rates and exemptions, visit the Inland Revenue Authority of Singapore (IRAS) website.

Goods and Services Tax (GST)

GST is charged on the supply of goods and services in Singapore. The standard GST rate is 8% (effective from January 1, 2023), and it applies to businesses with an annual turnover exceeding $1 million. Small businesses with a turnover below this threshold are not required to register for GST unless they voluntarily choose to do so.

GST Registration

  • Compulsory Registration: Businesses must register for GST if their annual turnover exceeds $1 million.
  • Voluntary Registration: Businesses can choose to register for GST even if their turnover is below $1 million. This might be beneficial if the business incurs significant GST on purchases, as it can claim input tax credits.

GST Compliance

  • GST Returns: Businesses must file GST returns on a quarterly basis, unless they qualify for annual filing.
  • GST Payment: GST payments are due one month after the end of the accounting period.

To understand GST registration and compliance, refer to the IRAS GST Guide.

Record Keeping Requirements

Proper record keeping is essential for tax compliance. Small businesses must maintain accurate and complete records of their transactions, including:

  • Simplified Record Keeping (SRK): For small businesses with annual revenue below $200,000 and assets under $100,000, IRAS offers simplified record-keeping requirements. This allows businesses to keep only business records without source documents like receipts and invoices, unless they are claiming benefits under specific schemes. For more information, see the IRAS e-Tax Guide on SRK.
  • General Record Keeping: All businesses must keep records for at least five years from the end of the accounting period. Non-compliance can result in penalties.

Tax Filing and Compliance

To stay compliant, small businesses must:

  • File Estimated Chargeable Income (ECI): Within three months after the financial year-end. The ECI form helps IRAS estimate the company’s tax payable for the year.
  • Submit Tax Returns: Use Form C-S if eligible, which simplifies the filing process for small businesses with annual turnover below $1 million. The deadline for filing Form C-S is December 15.

For detailed guidance on tax filing, visit the IRAS website.

Additional Tax Obligations

  • Withholding Tax: Ensure compliance with withholding tax obligations for payments to non-residents. This includes deducting tax on payments for services rendered by non-residents.
  • Audit and Compliance: Maintain proper accounting records and undergo annual audits as required by the Companies Act. This ensures that financial statements are accurate and comply with accounting standards.

Tax Incentives for Small Businesses

Singapore offers various tax incentives to support small businesses:

  • Productivity and Innovation Credit (PIC) Scheme: Although the PIC scheme has expired, small businesses can still benefit from the Research and Development (R&D) tax incentive. This scheme provides a tax deduction of up to 250% for qualifying R&D expenditures.
  • Start-Up Tax Exemption Scheme: Newly incorporated companies may qualify for a full exemption on the first $100,000 of normal chargeable income, as mentioned earlier.

Empowering Businesses with SGTUFF

At SGTUFF, we believe in creating a level playing field for businesses in Singapore. Whether you’re a tenant navigating leasing challenges or an SME striving for growth, we provide resources and insights to help you succeed.

Here’s how you can get started:

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