30 November - Corporate Income Tax Filing: Are you ready?

Introduction

The corporate income tax (“CIT”) filing deadline of 30th November is fast approaching. For SMEs, ensuring timely and accurate tax filing is crucial to avoid penalties and interest charges. However, navigating the complexities of corporate tax regulations can be a daunting task for small and medium-sized enterprises that may not have an in-house accounting team. In this article, we’ll provide some key areas and resources that SMEs should focus on to remain tax compliant.

1. Inland Revenue Authority of Singapore (“IRAS”) Tips

The best place to seek for clarification is no doubt at IRAS Webpage. There are many resources in IRAS portal and one of which will be this – A short and succinct article on 5 fundamental tips for CIT. Companies may refer to this article in their preparation for CIT filing although there are certainly more to it. IRAS offers a rather comprehensive website and it is highly recommended for all business to clarify when in doubt.

More information can be found in this link: https://www.iras.gov.sg/who-we-are/what-we-do/annual-reports-and-publications/taxbytes-iras/companies-self-employed-partnerships/five-fundamental-corporate-income-tax-tips-for-companies

2. Understand Deductible Expenses

Based on experience working with various SMEs, one of the key challenges will be the classification of deductible expenses. It is common for SMEs to not understand which expenses are deductible under current regulations. Common deductible expenses for SMEs include:

• Office rent and utilities

• Salaries and wages for employees

• Business-related travel and entertainment expenses

• Professional services, such as legal and consulting fees

  
  

Similarly, there are some expenses which are not deductible. Including them by mistake into your computation may result in an understatement of Taxable Profits. It is thus important to understand the deductibility of each expense. The following are some examples of Non-deductible expenses for SMEs:

• Depreciation & Ammortisation

• Private expenses not incurred for business purposes

• Legal and professional fees (non-trade or capital transactions)

• Foreign Exchange Loss (non-trade or capital transactions)

3. Capital Allowances

Another common confusion amongst SMEs’ tax computation arises in the area of Capital allowances. These allowances are tax deductions that businesses can claim on the “depreciation” of capital assets used for business purposes. Capital allowances help reduce the taxable income of a business, thus lowering its overall tax liability.

Key points to understand about capital allowances:

• What Qualifies for Capital Allowance?

  Capital allowances are typically available on the purchase of fixed assets, such as machinery, vehicles, office furniture, and computer equipment. These are considered capital expenditures, and businesses can write off the cost over a period of time (through depreciation).

• Types of Capital Allowances

  In Singapore, the Writing-Down Allowance (WDA) applies to most qualifying assets, allowing businesses to claim a percentage of the cost each year. For example, a company may be able to claim 20% of the cost of an asset each year over five years, depending on the asset type.

  There are also Accelerated Capital Allowances (ACA), which may apply to certain types of assets, allowing businesses to claim a larger portion of the asset’s cost upfront.

• Qualifying Criteria

  To qualify for capital allowances, the asset must be used for business purposes, and it must be owned by the company (not leased). Additionally, the claim must be supported by documentation, including invoices or receipts for the purchase of the asset.

Tax calculations can be complex, especially when dealing with depreciation, allowable deductions, and potential credits. Errors in tax calculations can lead to delays in the processing of your tax return, having tax queries or even tax audits.

4. File Your Tax Return on Time

Missing the tax filing deadline can lead to serious consequences, including penalties and interest charges on unpaid taxes. Be it CIT filing or any other taxes (Goods & Service Tax Filing, Withholding Tax etc), it is crucial for firms to stay compliant and avoid missing filing deadlines.

It is highly advisable to task your tax department to start early and plan ahead. SMEs that face difficulties in their tax computation may consult tax consulting firms for professional advice.

Conclusion

Tax filing may seem a daunting tasks especially for SMEs. Many SMEs prefer to engage a tax consultant to assist their company for CIT filing. By providing professional advice and accurate computation, these professional firms will work closely with businesses to ensure the accuracy and timeliness of the submission. This will also enable SMEs to adopt good industry practices, consider tax planning and suggestions on improving general tax processes.

The 30th November corporate income tax filing deadline is fast approaching. By staying organised, understanding your tax obligations and seeking professional help when needed, SMEs can ensure they stay compliant and avoid penalties.

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DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily represent the views and opinions of any individuals or organizations with which the author may be affiliated, either in a professional or personal capacity, unless explicitly stated.

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