As a business-friendly city-state, Singapore leads by example in introducing reduced corporate income tax rates as well as tax exemptions and incentives. However, all business decisions have tax implications and it is important that your company manages its income tax obligations efficiently. Read on for a quick guide to tax computations and why they are required when filing Form C or C-S come corporate tax season.
What is Form C or C-S?
Before understanding tax computations, you need to know if your company is required to file Form C or Form C-S to the Inland Revenue Authority of Singapore (IRAS).
If your company is carrying on a trade or business in Singapore, you must file Form C or Form C-S annually in order to declare your company’s actual income. Even if you are making losses, you are still required to file either of these forms.
Form C-S is a simplified version of Form C. Your company will qualify to file Form C-S if it meets all of the following conditions:
- Your company is incorporated in Singapore
- Your company has an annual revenueof SGD 5 million or below
- The company only derives income taxable at the prevailing corporate tax rate of 17%
Note: Single Filing Deadline from 2021
Traditionally, the annual filing deadline for paper filing is 30 Nov and 15 Dec for e-Filing. However, the extended filing deadline of 15 Dec will cease to be available in 2021. This means that all companies will be required to e-File their Year of Assessment (YA) 2021 Corporate Income Tax returns by 30 Nov 2021.
What is a Tax Computation?
A tax computation is a statement showing tax adjustments made to the accounting profit/loss in order to arrive at an income that is brought to tax. Tax adjustments may be made in the event of non-deductible expenses, non-taxable receipts and capital allowances.
Do I Need to Submit a Tax Computation?
Yes. You need to submit a tax computation if you are filing Form C, along with your financial statements and supporting schedules.
If you are filing Form C-S, you are still required to prepare a tax computation, along with financial statements and supporting schedules, and submit them to IRAS upon request.
When Should I Start Working on Tax Computations?
In general, it is good practice to prepare tax computations ahead of completing Form C or Form C-S each year.
In order to do so, you will have to keep proper records and accounts of all business transactions. This helps you fulfill your tax obligations correctly and accurately.
Why are Tax Computations Needed?
Although your company’s financial statements may reflect a certain net profit/loss, your company’s chargeable income may in fact be different from that amount. As such, you may have to make tax adjustments to your net profit/loss.
This is because some of your company’s expenses may not be deductible for tax purposes. Similarly, some of the income received by your company may not be taxable, or it may be taxed separately as a non-trade source income.
You may also wish to claim capital allowance on your fixed assets or claim unutilised losses, capital allowances or donations brought forward from previous YAs.
What are Some Examples of Tax Adjustments?
As a general guide, here are some common tax adjustments made to one’s net profit or loss amount:
- Deduct non-taxable income, such as foreign-sourced income
- Deduct investment income (e.g. interest, dividend and rental) which will be assessed separately as non-trade income
- Add disallowable expenses
- Add direct expenses relating to the investment income (to be allowed against the respective investment income taxed as non-trade income)
- Section 14Q deduction for expenditure incurred on renovation or refurbishment works, where applicable
- Add net investment income such as interest, dividend and rental (after deducting the direct expenses relating to the investment income)
- Deduct unutilised capital allowances brought forward from previous YA where applicable
- Deduct capital allowances for the current YA if you wish to claim for capital allowances on fixed assets
- Deduct unutilised losses brought forward from previous YA where applicable
- Deduct unutilised donations brought forward from previous YA where applicable
- Deduct donations made to approved Institutions of a Public Character (IPCs) if any
What Happens When No Tax Adjustments are Required?
There are situations in which no tax adjustments are necessary.
The adjusted profit/loss amount in your tax computation is likely to be the same as the net profit/loss stated in your financial statements if:
- All the expenses reflected in your profit/loss statements incurred are deductible for tax purposes
- All the income reflected in your profit/loss statements are taxable
- You are not claiming for capital allowances on fixed assets
- There are no unutilised losses/capital allowances/donations brought forward from the previous YA.
If you are filing Form C, a tax computation must still be submitted even if no tax adjustments are made. You also need to show the chargeable income and the tax payable or the unutilised losses carried forward in your tax computation where applicable.
Let Corporate Services Singapore Assist You
If you are struggling to keep your business’ compliance status in tip-top shape, consider engaging a one-stop professional corporate services provider that can assist you in meeting the various statutory compliance deadlines. Outsourcing taxation enables you to optimise your taxes and keep your business tax-compliant while freeing up your time for more high value-added or lead-generating activities.
At Corporate Services Singapore, our taxation specialists implement tax planning strategies that work best for your organisation. We aim to reduce existing tax liabilities for your business and promptly file tax returns and computations to help you stay on top of your tax obligations.
Contact Corporate Services Singapore at 6602 8286 or email email@example.com for all-inclusive, personalised business solutions that place strong emphasis on accuracy, thoroughness and timeliness. Leverage the breadth of our tax expertise and experience to ensure the growth and success of your business.