What You Should Know About IRAS And Its Significance To Your CompanyDownload Now: FREE GST 2023 GuidebookDownload Now: FREE Employment Pass ChecklistDownload Now: Free Incorporation Checklist
If you’re paying taxes in Singapore, the Inland Revenue Authority of Singapore (IRAS) is the government body responsible for collecting them. They’re also the ones drafting tax legislation and providing advice and assistance to the government.
Here’s everything you need to know about what IRAS is, what they do, and when you might need to approach them.
What is IRAS?
IRAS as the body we know today dates back to 1992, but the Singapore Income Tax Department was first formed in 1947.
The organisation was introduced to deal with the collection of taxes from both individuals and businesses.
It also has several other departments, including those that handle investigations, enforcement, and international taxation. IRAS states that it collects around 70% of the Government’s Operating Revenue. This money is then used to support Singapore’s economic growth and social programs.
What does IRAS do?
As mentioned above, IRAS is responsible for the collection of taxes. It is also there to answer any questions that companies or individuals have about taxation in Singapore, as well as having an advisory function.
Let’s look at the two main responsibilities of the IRAS:
1. Collecting Taxes
There are a number of different taxes that IRAS deals with.
A few examples of these are:
- Income tax (payable by companies and individuals)
- Goods and Services Tax
- Property Tax
- Stamp Duty
- Casino Tax
2. Giving Tax Advice To The Government
IRAS is under the authority of the Ministry of Finance. The second largest part of its job is to act as the chief tax advisor for the Singaporean government.
This involves assisting with drafting tax policies and legislation as well as drawing up tax treaties.
How do you transact with IRAS?
Both individuals and businesses will be given access to a system called myTax Portal. This system allows you to view and manage your tax transactions with IRAS.
Here are just a few things you can do with this e-Service:
- File your taxes (e.g., income tax, corporate tax)
- View correspondences and notices from IRAS
- Apply for waivers (e.g., late filing fees)
- Register for GST
To access the system you’ll need to have your SingPass ID (individual) or CorpPassID (business) in hand. If you’ve appointed a tax agent, you will need to authorise them via CorpPass before they are able to log in and manage your taxes.
Record Keeping & IRAS
IRAS requires companies to keep proper records and accounts of their business. This includes keeping a record of financial transactions (and related documents), accounting records, and bank statements.
Businesses are encouraged to use an IRAS-approved piece of accounting software to make sure their records are kept properly. Failure to keep proper accounts can lead to sanctions and fines on enforcement.
Tax Compliance of Companies
Companies in Singapore have to determine when their financial year will start and the end date (Financial Year End or FYE). Alongside that, companies must file its annual return with the Accounting and Corporate Regulatory Authority (ACRA) within 7 months after its FYE.
There are two tax reports that companies need to submit: the ECI and the Form C-S/C. They must submit their Estimated Chargeable Income (“ECI”) to IRAS within three months of its FYE.
The “Year of Assessment” (YA) refers to the year in which income tax is calculated and charged. The assessment is for the income earned in the preceding year.
If the Company’s FYE is 31 December 2020, the YA where tax is reported is YA 2021.
If the Company’s FYE is 30 June 2021, the YA where tax is reported is YA2022.
On the 30 November of the YA, the Company is required to submit the final tax report usually known as Form C-S/ C. This is a declaration form for companies to declare their actual income. Companies must ensure that the form is correctly completed and gives a full and true account of the company's income. For more information on statutory compliance regulations businesses need to follow, read on here.
Things You Need To Know About Taxation In Singapore
Territorial Tax System
You should know that Singapore operates on a territorial tax system. What this means is that any taxes companies pay will be based on where their profits came from as opposed to where the company is registered.
For example, if you have a company that is registered in Singapore, but operates wholly out of another country, you may only need to pay tax on minor things like expenses.
Low Corporate Income Tax Rates
Corporate income tax rates in Singapore are in the range of 0-17%.
Once a company’s tax liability has been paid, they are free to share the after-tax profits with shareholders through dividend payments. As the tax is single-tier, shareholders don’t have to pay tax on any dividends they get.
There are also tax rebates and incentives that businesses can receive which will make the tax amount owed even lower. For a more comprehensive look at Corporate Tax in Singapore, read on here.
Free-Trade Agreements (FTA)
Singapore has forged 26 free trade agreements as of 2021. Free trade agreements (FTAs) are treaties between two or more nations to form a free-trade area. These treaties aim to eliminate barriers and restrictions in trading and investments.
Aspiring entrepreneurs and existing companies can take advantage of these FTAs and base their companies here in Singapore. Here are a few things Singapore-based companies may enjoy:
- Tariff concessions
- Faster entry into different markets
- Intellectual Property rights are better enforced
How Can I Calculate My Corporate Tax Calculation?
Businesses looking to calculate how much corporate tax they need to pay to IRAS can use this calculator to work it out.
That covers all of the basics you need to know about IRAS. It’s important that you understand and comply with your tax obligations and so it’s a good idea to familiarise yourself with the relevant rules that apply to you.
Fully understanding the tax regime in Singapore can be complex, so it may be in your best interest to hire a qualified tax agent to guide you through managing your taxes. Reach out to Sprout Asia for any queries you have on taxes, we’ll be happy to help!