Filing Requirements for Small Businesses in Singapore
If you are new to the business world, filing requirements for small businesses in Singapore can appear very daunting. Regardless of their size or organisational structure, all Singaporean businesses are required to adhere to specific regulatory requirements every year. Singapore's obligations are relatively easy to understand and unambiguous compared to those of other nations. However, a busy businessperson can overlook a deadline, which could incur fines and penalties.
As a result, it's critical to comprehend compliance standards and develop a strategy for meeting them. With that in mind, we have prepared a quick guide to help you understand your filing of annual return requirements mandated when operating a small business in Singapore – and how to move forward successfully throughout the process.
Annual Filing Requirements for Small Bussiness in Singapore
Any small business in Singapore must file an annual report as needed by two government bodies to conform with Singaporean law:
- The national regulator of corporate entities in Singapore is the Accounting and Corporate Regulatory Authority (ACRA).
- Singapore's Inland Revenue Authority, or IRAS, is responsible for tax collection and establishing the timeline for annual filings.
Are You a Small Business Owner in Singapore?
What to consider to be a small business? If a Singapore company is a private limited company, it may be eligible for the small company classification. Technically, listed firms are major organisations and are therefore automatically subject to the yearly statutory audit requirement - yet a small business in Singapore is often exempt from this requirement.
A small business also refers to whether it has met two of the three audit exemption requirements for the most recent two financial years, specified further in the article. The company's assets, revenue, and consideration of personnel count when determining whether an audit is exempt.
According to the Articles of Association, a Singaporean company's revenue is equal to the sales amount produced by its primary source of commercial activity. The latest accounting standards record the properties, cash, and trade receivables that make up total assets.
Preparation of Unaudited Financial Statements
The importance of financial statements is in decision-making and shareholder communication. It would be best if you compiled your yearly financial statements in line with the Financial Reporting Standards of Singapore based on your company's financial activities throughout the accounting year. We strongly advise monthly bookkeeping if you have a medium to high volume of monthly accounting transactions to keep your ledgers organised.
A small business in Singapore that sees relatively few transactions occur per calendar month may be able to prepare quarterly financial statements. However, the best practice is to keep a monthly financial ledger that will quickly demonstrate your finances – income and outgoings – when preparing to file comes about.
There are four key elements of information a small business in Singapore should include in their financial statements:
- Statement of changes in equity
- Cash flow statement
- Profit and loss accounting
- Balance sheet
You may need to audit your financial statement if the company meets two of the following three conditions:
- It employs more than 50 people
- It has more than S$10 million in assets
- It has a total annual revenue exceeding S$10 million
Small Businesses Audit Exemption Criteria
A small business in Singapore needs to have its financial statements for auditing – this is a central component of every detail that goes into filing the annual return paperwork. If a business is declared an exempt private company with annual revenue of S$5 million or less, it is exempt from auditing.
A new small business model, which will decide Singapore's exemption from statutory audit, will take the place of this strategy. Essentially, a business will exclude from auditing without necessarily being an exempt private entity.
Qualification as a small business in Singapore if it satisfies the requirements listed below:
1. In the relevant current fiscal year, it operates as a private firm.
2. It meets at least 2 out of 3 conditions for the most recent two years.
- It employs less than 50 people
- It has less than S$10 million in assets
- It has a total annual revenue of less than S$10 million
To qualify as a small group or holding company for the most recent two fiscal years, a group firm must satisfy at least two of the three quantitative criteria on a consolidated basis. Until it becomes disqualified, a Singapore business that has succeeded in becoming a small business continues to be one for the following years.
Disqualification happens when:
- At any point throughout the fiscal year, the corporation ceases to be private.
- The business failed to satisfy at least two quantitative requirements for the past two fiscal years.
Annual General Meeting (AGM)
Every calendar year, each organization must hold an Annual General Meeting (AGM) – even if you are a small business in Singapore that ordinarily would not consider such meetings necessary. In fact, as a private company, a small business in Singapore can vote to dispense with an AGM for a given calendar year if all members with voting rights deem it so unanimously.
At most, 15 months may elapse between subsequent AGMs, and every business must have an AGM within 18 months of first incorporating.
Filing of Annual Returns With ACRA for Small Businesses
- Name of the Business and Registration Number
- The main activities
- Address for Registered Office
- Information about company officers (directors, secretary)
- Information on shareholders, share value, etc.
A company secretary or a director of the company must sign the annual report. The following are the most critical considerations when filing an annual return:
- When a company files an annual return with ACRA, it must include its audited financial statements(if applicable)).
- Filing of annual returns should not be later than 30 days following the Annual General Meeting (AGM) date. A company may be able to file its annual return in some circumstances without holding an AGM.
- Small businesses are not required to attach their financial statements.
Filing of Annual Tax Return with IRAS
By November 30th of every calendar year, every company in Singapore must submit a return to IRAS by law. In Singapore, the calculation for taxation is on a preceding-year basis.
That means that the tax you will need to pay in the current year will be based on the profits reported in the previous financial year and will form the basis of your reporting.
Filing of Estimated Chargeable Income (ECI) for Small Businesses in Singapore
To report Estimated Chargeable Income (ECI) to the Inland Revenue Authority of Singapore (IRAS) as part of the broader requirements of filing annual return documentation.
A small business in Singapore needs to do so within three calendar months of the end of the financial year to avoid penalization. Some small companies might determine that their Estimated Chargeable Income figure stands at zero. However, that does not exempt any small business in Singapore from failing to report this to the IRAS.
Instead, it will be necessary to complete the relevant form accordingly but report ECI as 'Nil' when prompted.
A small business in Singapore must determine whether it meets the requirements for the ECI filing waiver. Find out when to file your company's first ECI if it is new.
At mytax.iras.gov.sg, your company's ECI filing status for the YA may say "Ready to File." However, you are exempt from filing if you are eligible for the ECI filing waiver. There is no need to ask IRAS for confirmation or let them know about the waiver.
Who Is Responsible for All These Filings?
The company secretary of any organization, including a small business in Singapore, hold full responsibility for filing annual return activities – using the best practices and deadlines as advised in this article and official Singapore governmental advice.
Company directors are also responsible for any delays, shortfalls, or dishonest conduct during the filing of the annual return process. Breaches in these areas range from financial penalties and fines or can escalate to the point that prosecution and potential incarceration occur.
Consequences for Failure to Comply
Failure to File an Annual Return in Compliance with ACRA
Any of the following grounds for non-compliance that ACRA may use to penalise a company include:
- If the business fails to hold its AGM on time
- if the company misses the deadline for submitting the annual report and financial accounts.
- If the AGM's financial disclosures are not up-to-date.
Companies risk a $300 fee for each infraction. ACRA recently increased the severity of its enforcement actions against non-compliant businesses.
Failure to File Tax Returns with IRAS
A company will receive a Notice of Assessment (NOA) from IRAS giving an estimate of the company's income if failure submission of ECI within three months of the financial year's end.
If the company disagrees with the estimated assessment after receiving the notice, it must submit a Notice of Objection within two months of the NOA's date. If the company's income on the income tax return is less than the estimate, IRAS accepts it as final if the company doesn't provide the notice of objection.
Small Business Owners Need to Face Filing of Annual Return Administration By Themselves?
There is no need to face filing of annual return administration alone!
Singapore is an international hub of business and commerce. Yet, it sustains its success due to stringent rules and regulations that ensure every organization plays by the rules – and pays its fair share of taxes.
While we have made every effort to ease your understanding of the requirements of every small business in Singapore in this regard, it is entirely understandable that many business leaders and entrepreneurs could remain overwhelmed and stressed to expand their small businesses.
Luckily, you are never alone on this journey. The experience and expertise of the team at Sprout Asia are ready to help directors of businesses to succeed – including in their obligations to tax and filing laws in Singapore.
Let's get in touch today and see how we can help.