What is a tax computation
A tax computation is a statement showing the tax adjustments to the accounting profit to arrive at the income that is chargeable to tax. Tax adjustments include non-deductible expenses, non-taxable receipts, further deductions and capital allowances.
Your company is required to submit a tax computation and the audited/unaudited* accounts, together with the Form C annually.
Why is there a need to make tax adjustments
The chargeable income of your company may be different from the net profit/loss shown in its accounts.
This is because some of the expenses incurred by your company may not be deductible for tax purposes. Similarly, some of the income received by your company may not be taxable or it may be taxed separately as a non-trade source income.
Besides, you may wish to claim for capital allowances on your fixed assets or claim for unutilised losses/capital allowances/donations brought forward from your previous Years of Assessment (YA).
Generally, you may need to make the following adjustments to your net profit/loss:
- Deduct income which are not taxable
- Deduct investment income (e.g. interest, dividend and rental) which are to be assessed separately as non-trade income
- Add disallowable expenses
- Add direct expenses relating to the investment income (to be allowed against the respective investment income taxed as non-trade income)
- Deduct Section 14Q deduction for expenditure incurred on renovation or refurbishment works where applicable (only applies to qualifying expenditure incurred from 16 Feb 2008 to 15 Feb 2013)
- Claim for enhanced deduction under the Productivity and Innovation Credit scheme
- Add net investment income such as interest, dividend and rental (after deducting the direct expenses relating to the investment income)
- Deduct unutilised capital allowances brought forward from previous YA where applicable
- Deduct capital allowances (including enhanced allowances under the Productivity and Innovation Credit scheme) for the current YA if you wish to claim for capital allowances on fixed assets
- Deduct unutilised losses brought forward from previous YA where applicable
- Deduct unutilised donations brought forward from previous YA where applicable
- Deduct donations made to approved institutions of a public character if any
Do you need to submit a tax computation if adjustment to net profit/loss is not required
You are still required to prepare and submit a tax computation even if you do not need to make any adjustment to your net profit/loss.
For example:
- All the expenses reflected in your profit/loss accounts incurred are deductible for tax purposes;
- All the income reflected in your profit/loss accounts are taxable;
- You are not claiming for enhanced deduction/allowances under the Productivity and Innovation Credit scheme;
- You are not claiming for capital allowances on fixed assets; and
- There are no unutilised losses/capital allowances/donations brought forward from previous YA.
In this case, your tax computation will show disallowable items to be added back as "Nil" and the adjusted profit/loss amount will be the same as the net profit/loss as per your accounts. You also need to show the chargeable income and the tax payable or the unutilised losses carried forward in your tax computation whichever is applicable.
You may refer to our Basic Tax Calculator to prepare your tax computation.
Basic Tax Calculator
Basic Tax Calculator is a template specially designed to help you with the preparation of tax computation and supporting schedules such as capital allowances and rental income schedules for your company. With the Basic Tax Calculator, you can work out the tax payable for your company.
The Basic Tax Calculator can also help you in your completion of Form C. After you have printed your tax computation using our Basic Tax Calculator, you will notice that there is a column on "corresponding Form C line number". This Form C line number will serve as a guide for you to fill in the amount in the relevant lines in your Form C.
This Basic Tax Calculator is not applicable for preparing tax computation for:
What if there is a change in accounting year-end
If there is a change in accounting year-end and your accounts covers a period that is more than twelve months, you may have to apportion the adjusted profit/(loss) to two different Years of Assessment (YA). The apportionment shall be done based on the number of days or months that fall within the basis period for each YA.
Example 1 (no apportionment required)
Where the change is within the same YA (e.g. accounting year-end changes from 30 Jun to 31 Dec with effect from year 2010), the company can prepare one set of tax computation for YA 2011 based on the accounts from 1 Jul 2009 to 31 Dec 2010. In this case, it is not necessary to apportion the adjusted profit/(loss) although the accounts covers a period of more than twelve months. The YAs and corresponding basis periods are as follows:
YA Basis period
2010 1 Jul 2008 to 30 Jun 2009
2011 1 Jul 2009 to 31 Dec 2010
2012 1 Jan 2011 to 31 Dec 2011
Example 2 (apportionment required)
Where the change is across two YAs (e.g. accounting year-end changes from 31 Dec 2010 to 31 Mar 2011), the company needs to prepare two separate tax computations i.e. for YA 2011 and YA 2012. The YAs and corresponding basis periods are as follows:
YA Basis period
2011 1 Jan 2010 to 31 Dec 2010
2012 1 Jan 2011 to 31 Mar 2011
2013 1 Apr 2011 to 31 Mar 2012
The company should:
i. Inform us of the change in the accounting month via the form Request for Form C for Newly Incorporated Companies or Companies Granted Waiver to Submit Form C / Change of Particulars (38KB); and
ii. In the case of Example 2, return the Form C for YA 2011 to IRAS for cancellation.
In the case of Example 2, the company has to furnish an estimate of its chargeable income for YA 2011 (basis period from 1 Jan 2010 to 31 Dec 2010) and YA 2012 (basis period from 1 Jan 2011 to 31 Mar 2011) by 31 Mar 2011 and 30 Jun 2011 respectively.
When submitting Form C for YA 2012 with reference to Example 2, please attach the accounts for the period 1 Jan 2010 to 31 Mar 2011 and provide a cover letter stating that you have enclosed the tax computations for both YA 2011 and YA 2012.
Note: Example 1 does not apply to newly incorporated companies where the first set of accounts covers a period of more than twelve months. In this case, the company must apportion the income for the first two YAs. For more details on the YA and basis period for new companies, please refer to Guide for new companies.