Corporate Compliance Requirement – IRAS Compliance
Annual Filing Requirements with the Inland Revenue Authority of Singapore (IRAS)
All registered companies in Singapore are expected to submit an annual ECI and Form C tax return to IRAS as part of their statutory compliance.
Estimated Taxable Income (ECI)
The ECI is an estimate of the taxable income of a company for a financial year. The IRAS requires each company to submit an ECI for the valuation year within 3 months of the end of the fiscal year.
You are exempt from the requirement to submit the ECI for a fiscal year ending in June 2020 or earlier if:
- your annual revenues for the fiscal year do not exceed $1 million; and
- your ECI is NIL.
You are exempt from filing the ECI for a fiscal year ending on or after July 2020 if:
- your annual income for the fiscal year does not exceed $5 million; and
- your ECI is NIL.
Understanding the Estimated Chargeable Income (ECI)
The IRAS defines ECI as the valuation of a corporation’s taxable income for the financial year, which is unique to each corporation. The ECI statement shall include the income of the corporation, excluding items such as capital gains from the sale of fixed assets. Thus, if a company is an investment holding company, its main source of revenue is investment income.
Companies have published data on their income in their tax returns (Form C). As of 1 January 2009, companies must also declare their income on the ECI form. Information on corporate income is one of the key economic data used for policy decision-making and for regular evaluation of the performance and development of industries and businesses. Given the rapid economic changes of recent years, there is also a growing need for more frequent and faster collection of comprehensive economic data. Instead of requiring companies to submit additional survey reports, it is more efficient and cost-effective to collect this economic data through existing channels, such as the ECI form.
In the absence of audited financial statements, it is possible to use the company’s management accounts to show the amount of revenue. If the revenue amount based on the audited financial statements differs from the amount stated in the ECI form and there is no change in your ECI, you do not need to revise the revenue amount.
Who needs to file the ECI?
An entity must submit an estimate of its taxable income (TCI) within 3 months of the end of the tax year. Even if the corporation estimates its taxable income to be zero, it must still file ECI “NIL” return.
Advantage of Filing ECI
IRAS offers flexible payment options to companies that submit their ECI declarations in advance. They can pay taxes in instalments. The earlier the ECI return is filed, the greater the number of instalments. For example, companies that file their ECI by the 26th of the month immediately following the end of the tax year can pay their tax in 10 instalments. If the ECI is filed on the 26th of the second month following the end of the fiscal year, this company will be granted 8 instalments, and for companies that file their ECI on the 26th of the third month, 6 instalments.
Failure to comply with filing of ECI
At the end of the 3 months waiting period and if the company has not complied with this requirement, IRAS will issue a Notice of Assessment (NOA) based on its estimate of the revenues of that particular company. The company then has one month from the date of the NOA to file its written objection if it does not agree with the estimated IRAS assessment. If it does not agree, NOA will be deemed to have accepted the valuation as final, despite the differences in the revenue information provided in both the Form C and the subsequently submitted statements.
All companies in Singapore are required to prepare their accounts and reports, which must include the income statement, balance sheet, cash flow statement and statement of changes in equity, in accordance with the Singapore Financial Reporting Standard (SFRS). The accounting bookkeeping records must be kept for 5 years.
Tax Return Filing
The deadline for filing the tax return is 30 November. The documents to be submitted are the audited or unaudited report and the tax calculation (Form C).
Simplified Tax Filing with Form C-S
In order to simplify the declaration procedure for small businesses, IRAS has introduced the C-S form as of the 2012 tax year – a shortened three-page tax return form for small businesses that are entitled to declare their income to IRAS.
From the 2017 tax year, companies can submit the C-S Form if they meet all of the following conditions:
- The company must be registered in Singapore;
- The company must have an annual income not exceeding $5 million.
- The company only has income taxable at the applicable corporate income tax rate of 17%; and
- The company is not claiming any of the following in the YA:
- Deferment of shares/loss of capital from the current year
- Group Relief
- Investment grant
- Foreign Tax Credit and Tax Deducted at Source
Financial Reporting – Audited and Unaudited
Every company is required to submit a financial report. The report consists of financial statements, such as the balance sheet and profit and loss account, notes to the financial statements and information on the main accounting methods used by the company, information on transactions and the interests of shareholders and directors.
A company is not required to prepare an Audited Report if:
For a company with a fiscal year starting before July 1, 2015
- The company has no corporate shareholders;
- The total number of individual shareholders is less than 20; and
- The company’s annual turnover is less than $5 million.
For a corporation with a fiscal year beginning on or after July 1, 2015, the corporation must have been qualified as a small business for the last 2 consecutive fiscal years.
A corporation will be considered a small business if (a) it is a private corporation in that fiscal year and (b) it meets at least 2 of the following 3 criteria in the last 2 consecutive fiscal years:
- Its total annual revenues do not exceed $10 million;
- Its total assets do not exceed $10 million;
- The number of employees does not exceed 50.
For a company that is part of a group, to be eligible for the audit exemption
- The entity must qualify as a small company; and
- The whole group must be a “small group”.
For a group to be a small group, it must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the 2 immediately preceding consecutive financial years.
A company must audit its accounts if it is not considered a small company and if it is part of a group, the whole group is not considered a small group.
Failure for Noncompliance with the Filing of Accounting Records
Non-compliance with any of the above requirements will result in sanctions and/or court prosecution.
Introducing mandatory electronic-filing for CIT returns (including Estimated Chargeable Income, Form C and Form C-S)
In line with the government ‘s direction for more efficient public service delivery and in line with the Smart Nation vision of harnessing technology to increase productivity, mandatory e-Filing of CIT returns will be carried out in phases as follows:
- Year 2018 – Companies with sales of over $10 million in 2017
- Year 2019 – Companies with sales of over $1 million in 2018
- Year 2020 – All companies