Year of Assessment (YA) refers to the calendar year in which a company’s annual income for the preceding calendar year is assessed and taxed by the Inland Revenue Authority of Singapore (IRAS). For example, a company’s total income for 2022 will be calculated and charged in 2023.
How to Know Your Company’s Year of Assessment
The decision is ultimately left up to the company as the YA is based on the fiscal year closing period, but most companies choose December 31 of every year as their closing date. Companies with fiscal years that exceed the standard 12 months will have to indicate this on their income tax return, with this being taxed as two years instead of one.
Should you decide to change your company’s fiscal year ending anytime in the future, you may do so by updating your BizFile+ account, and the IRAS will immediately be updated on this.
Importance of Year of Assessment
Any confusion regarding your company’s year of assessment may lead to various consequences, one of which being the incorrect filing of your company’s tax returns, which can result in inaccurate tax calculations and potential penalties for providing false information. You might even fail to meet the tax return deadlines, leading to incurring more penalties and additional charges that can increase your tax liability.
Your company also risks making untimely tax planning strategies and financial decisions as these would be based on faulty and inaccurate assumptions about the assessment period of your income, leading to missed opportunities and inefficient accounting performance overall.
Finally, submitting tax filings that don’t align with your company’s correct year of assessment may alert the tax authorities and put your company under a tax audit or investigation, which could result in further penalties should any discrepancies be unearthed.
Calculating Your Annual Income Tax in Singapore
The deadline for filing corporate income tax in Singapore depends on the YA. Typically, companies are required to file their income tax by the 30th of November the following year, but it is best to check with your accountant for any unique terms and conditions with your company regarding filing taxes with the IRAS.
Calculating corporate income tax for companies in Singapore involves the following steps:
- Determine the Taxable Income
First, determine the chargeable income that you will note in your corporate tax return forms. This is done by deducting allowable expenses and tax deductions from your total income, where total income stands for any income source that the company has earned during the YA. This may include revenue from your business operations, capital gains, and more.
- Check the Tax Rates
Singapore is known for having one of the lowest tax rates in Asia, staying at a consistent flat rate of 17%. Depending on the nature of your business, however, it is important to check the tax rates that apply to your company.
- Apply Tax Incentives and Any Exemptions
Singapore is also known for its tax incentives and tax exemptions that are available to different industries. Check whether your company is eligible for these exemptions, and apply them to your calculations.
Incentives may include Start-up Tax Exemption (SUTE) meant for startups and small businesses, and the Corporate Income Tax Rebate, where the eligibility criteria is announced during the annual budget statement.
- Deduct Capital Allowances
You may have fixed assets in your company that are qualified under capital allowances. These include assets such as machinery, buildings, equipment, and other assets listed by the IRAS. Check with your accountant or tax advisor on your capital allowances to factor them into your tax calculations.
- Calculate Your Tax Liability
You can calculate the tax owed by your company through this formula:
Chargeable Income x Corporate Tax Rate = Tax Liability
- File Your Corporate Income Tax Return
Finally, fill out and submit your corporate ITR form to IRAS before the given deadline, and ensure that all the information and calculations are correct. For accurate calculations, consider working with an accounting firm, tax consultant, or a corporate services firm that has vast experience in filing corporate tax returns in Singapore.
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