Small business owners face a daunting task as tax season approaches, juggling the complexities of small business tax preparation while striving to maximise their returns and minimise their tax liabilities. With the complexities of the tax code and the unique considerations for small businesses, it can be overwhelming for a lot of small businesses. However, armed with the right knowledge and strategies, small business owners can streamline the process and optimise their tax returns.
In this article, we will delve into the world of taxes for small businesses, offering valuable tips and tricks for small business tax preparation. Whether you’re a seasoned entrepreneur or just starting out, these insights will help you navigate tax season with confidence and ensure that you make the most of every opportunity to save on taxes.
Understanding the Tax System in Singapore
It’s no secret that Singapore has established itself as a leading destination for startups and entrepreneurs. With its stable infrastructure, reliable regulatory framework, and business-friendly legal and tax system, Singapore offers a top-notch environment for businesses to thrive. And with a top ranking on the 2022 Index of Economic Freedom and 4th place in the 2021 Corruption Perceptions Index, it’s no surprise that this island nation has become a premier international hub for entrepreneurship and innovation.
Singapore’s tax laws are complicated and constantly evolving, which is a challenge for small business owners. Understanding the laws and regulations surrounding taxes is crucial for the success and sustainability of any business.
Types of taxes for small businesses in Singapore
Navigating the world of taxes for small businesses requires a solid understanding of the various tax types and their implications. From corporate income tax to goods and services tax (GST), each tax category presents unique challenges and opportunities. In this section, we will shed light on the different types of taxes that small businesses in Singapore encounter, equipping you with the knowledge and insights necessary for effective tax preparation.
Corporate Income Tax
Businesses are generally taxed on their income at a flat rate of 17%. Check out Lanturn’s Friendly Guide to Singapore Corporate Taxes for all the details you need regarding the country’s corporate income taxes.
- Goods and Services Tax (GST)
Businesses with a turnover of more than SGD 1 million per annum must register for GST and charge 7% GST on their taxable supplies. To know more about this, check out Lanturn’s Beginner’s Guide to Singapore’s Goods and Services Tax (GST).
- Property Tax
Businesses that own property in Singapore are subject to property tax, which is based on the annual value of the property.
- Withholding Tax
Businesses are required to withhold tax on certain payments, such as rent, director’s fees, and interest, at the prevailing rate.
- Stamp Duty
Businesses are required to pay stamp duty on certain transactions, such as the transfer of property and shares.
Small businesses in Singapore are subject to corporate income tax filing, not personal income tax filing. Individuals are taxed on their income at progressive rates; however, if a sole proprietorship or partnership, the individual owner(s) will be considered self-employed and need to file for personal income tax on their share of the business’ income.
If you are a freelancer or self-employed in Singapore, you’ll want to check out our in-depth Singapore Tax Guide for Freelancers and Self-Employed Persons. This article delves into the tax laws and regulations applicable to freelancers and self-employed individuals in Singapore.
Singapore Tax Filing Deadlines
Staying on top of Singapore’s tax filing deadlines benefits small businesses, especially when it involves taxes for small businesses. It is essential to remember that late filing and payment of taxes can result in penalties and fines, making small business tax preparation a crucial aspect of financial management.
Here is a table of the tax filing requirements and deadlines for small businesses in Singapore:
|Tax Type||Filing Deadlines|
|Corporate Income Tax||Businesses in Singapore are required to file their Estimated Chargeable Income (ECI) Filing within three months after the end of their financial year. The deadline for e-filing and paper filing is the same, and any late filings are subject to penalties. On the other hand, Form C-S/ Form C-S (Lite)/ Form C must be filed by 30 Nov, 11 months from the end of the financial year.|
|GST||Businesses registered for GST are required to file their GST returns on a quarterly or annual basis, depending on their turnover and tax obligations. They must file the GST return within one month after the end of the relevant quarter. The government may impose a late filing fee for late submissions.|
|Property Tax||Property tax in Singapore is based on the annual value of the property, and it is assessed by the Inland Revenue Authority of Singapore (IRAS). Property tax is payable yearly in advance and is due by January 31st. All other property tax notices are due one month from the date of the notice.|
|Withholding Tax||Businesses must file their withholding tax returns by the 15th day of the second month following the end of the quarter. The deadline for e-filing and paper filing is the same, and late filings will incur penalties.|
|Stamp Duty||If the document is signed in Singapore, it should be stamped within 14 days of signing it. If the document is signed overseas, it should be stamped within 30 days of receiving it in Singapore. Failing to do so within this timeframe may result in penalties.|
It’s advisable to check for any updates and consult with a professional regarding tax filing requirements and deadlines. You can also check the IRAS due dates online.
Tips for Preparing for Tax Season
1. Plan ahead.
Tax preparations for small businesses have to be done early to ensure a smooth and timely filing process. By giving yourself ample time, you can gather all the necessary documents, including financial statements, receipts, invoices, and other records required by the IRAS (Inland Revenue Authority of Singapore). Organising these documents beforehand will enable you to file your taxes accurately, reducing the risk of errors and potential penalties.
In addition to early preparations, small business owners must set aside funds specifically for taxes. Understanding your tax obligations and allocating funds in advance can help you avoid last-minute financial hurdles and ensure you have sufficient resources to meet your tax payment deadlines. By proactively managing your finances and earmarking a portion of your earnings for taxes, you can maintain compliance with Singapore’s tax regulations and alleviate any unnecessary financial stress.
2. Filing and paying taxes on time.
Filing and paying taxes on time is crucial for the smooth operation of your business, especially when it comes to taxes for small businesses. One of the essential steps in managing your taxes is staying aware of deadlines. Ensuring timely filing and payment is critical to avoid penalties and fines. Failure to submit and pay taxes on time can lead to legal issues and potential criminal penalties.
To stay updated on tax-related information, it is advisable to regularly check with the IRAS (Inland Revenue Authority of Singapore) for the latest updates. The IRAS myTax Portal provides a convenient platform to access essential resources and update your contact information and notification preferences. By keeping your details up to date, you can receive timely reminders about your tax filing obligations, helping you stay on top of deadlines.
3. Keeping accurate records throughout the year.
Businesspeople in Singapore must prioritise their tax obligations, including taxes for their small businesses, by maintaining accurate and up-to-date financial records throughout the year. This involves diligently tracking income, expenses, and other relevant financial documents crucial for small business tax preparation. By doing so, they can ensure their accuracy and completeness.
To stay organised and effectively manage taxes for their small businesses, it is essential to establish a reliable system for tracking financial records such as invoices, receipts, and bank statements. By implementing a proactive approach to small business tax preparation,owners can optimise their financial processes.
One small business tip for taxes we can give you is to try and utilise accounting software, which offers the advantage of automating the tax process, increasing efficiency, and enhancing accuracy. Lanturn has a great accounting tool which can help streamline your accounting process so you can focus on your growing business.
4. Avail of any possible deductions and incentives applicable for your business.
Singapore boasts some of the lowest tax rates globally, and to support the growth of businesses, the government offers various tax and financial incentives to further lower effective tax rates. These incentives can significantly reduce small business tax liability and contribute to their financial success. Additionally, there are tax exemptions and incentives for specific industries or activities.
Bear in mind that tax reliefs are typically granted for specific purposes, such as supporting education or investing in approved funds. In contrast, people can claim tax deductions for expenses incurred in earning income, such as business expenses, donations, and CPF contributions.
Here are some government schemes that you can apply for tax deductions if your business qualifies:
- Productivity & Innovation Credit (PIC) Scheme
- Land Intensification Allowance (LIA)
- Business & IPC Partnership Scheme
- Double Tax Deduction for Internationalisation Scheme
Here are some tax deductions your business can take advantage of:
- R&D Tax Deductions
- Tax Deduction for Expenses Incurred on Renovation or Refurbishment Works
- Tax Deductible Donations
- Business Losses and Unutilised Capital Allowances
- Capital Allowances
A business can apply for the following applicable tax reliefs:
5. Don’t hesitate to utilise accounting software and professionals.
Navigating the tax season can be challenging and time-consuming — especially as a small business owner. As mentioned before, accounting softwares can be a huge help in the tax season because of how they can help you save time, reduce stress, and can provide you with the following benefits:
- Ensure accuracy and minimise human errors: Accounting software can automatically perform complex calculations and ensure accuracy, reducing the risk of human errors and miscalculations.
- Ease in Record-keeping: The software can help automate the process of tracking expenses, generating invoices, and categorising transactions, which can save time and reduce the chance of human error.
- Streamline your tax preparation process: With an accounting software, all financial records can be stored in one centralised place, making it easier for business owners to access and manage their financial information. Most importantly, the software can also generate reports, making it easy for a business to collate the needed documents upon filing.
By utilising accounting software specifically designed for small business tax preparation, owners can leave the tedious back-end work to the software and focus on other important things.
While utilising accounting software can be convenient for small business tax preparation, there are tasks that are better suited for a real accountant or tax specialist. Specialists have a thorough understanding of tax rules and regulations, and can provide personalised advice and support to ensure your business stays compliant and maximises any available tax benefits. They can also offer a more comprehensive solution for all your small business tax preparation needs, providing peace of mind and freeing up valuable time for you to focus on running your business.
Hiring an accounting specialist like Lanturn can provide you with the following benefits:
- Knowledge, experience, and expertise: An expert tax specialist may assist a small business in navigating the complexities of the tax system in Singapore and ensuring compliance with all regulations. They can offer guidance on financial and tax planning methods and assist in locating potential for tax reductions.
- A dedicated specialist to help you: An accounting professional can offer personalised attention to a small business, providing customised solutions and advice based on the business’s specific needs and goals. Having a dedicated, experienced tax expert can also help you navigate the tax landscape and offer advice on how to minimise your tax liability and ensure that your business complies with all tax laws and regulations.
- Customisable reporting for tax filing: The right professional can provide customised reports tailored to your specific tax needs, giving you a clear and comprehensive view of your financial information. This level of customisation can greatly aid in the accuracy and efficiency of tax filing, helping you avoid costly mistakes and penalties.
- Saving time and gaining peace of mind: By outsourcing your tax preparation to a professional like Lanturn, you can save valuable time and energy that you can redirect towards growing your business. The peace of mind that comes with having a seasoned expert handle your taxes and ensure timely filing is a bonus, taking the stress out of tax season.
Small business owners in the island nation may find it difficult and daunting to get through tax season, but with careful planning and knowledge of the tax system, it can be made much more straightforward. Understanding the various types of taxes for small businesses in Singapore and taking advantage of tax deductions can help you better plan for and manage your tax liabilities. In addition, utilising the tips and tricks outlined in this article, such as utilising tax software, or hiring a tax professional, can help make the small business tax preparation process smoother and less stressful.
Remember, planning and staying informed are essential to ensure a successful tax season.
Lanturn Accounting & Tax Services
Introducing Lanturn, the premier accounting and bookkeeping solution for all business sizes in Singapore. With our experienced team of accountants and cutting-edge cloud technology, we’ll make managing your finances a breeze.
- Our automated expenses system and integrated platforms help your team save time and make it easy for you and your business to stay up-to-date on all compliance and accounting matters, giving you more time to focus on your core business.
- Our innovative task-management technology makes it easy for our team to work with you and keep track of all the information necessary to close your accounts.
- Lanturn’s advanced bookkeeping portal allows you to enjoy a quicker, better, and transparently priced experience.
- Our OCR technology ensures that all costs are captured quickly and accurately, minimising your tax bill.
- Lanturn’s specialised yet manageable expense and bill capture system allows you to photograph and send them to a dedicated email address, and we’ll handle the rest.
Lanturn’s small business tax preparation tax services come with the following benefits:
- Cost effective pricing.
- Personalised advice on the correct deductions for your company.
- Never miss a deadline ever again. Lanturn will track it for you.
Lanturn provides a wide range of tax services, from GST Registration to ECI Submission. Don’t waste your time on tedious accounting and tax processes. Choose Lanturn and let us handle the heavy lifting. With our advanced technology and expert team, we’ll make sure your finances and taxes are always in order.
Avail Lanturn’s accounting & tax services. And experience the difference!