Requirement to Submit 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.

Companies should prepare their tax computations annually before completing the Form C-S/ C. Only companies filing Form C need to submit their audited/unaudited* financial statements, tax computation and supporting schedules together with Form C. Companies filing Form C-S are still required to prepare their financial statements, tax computation and supporting schedules and submit them to IRAS upon request.

*Unaudited financial statements are accepted if the company is exempted from audit under the Companies Act.

Records and Accounts Keeping

Companies are required to keep proper records and accounts of business transactions. Using an accounting software helps business improve record keeping and comply with tax obligations. Business can also use the information captured in the software to ensure that operations are effective and efficient. The IRAS’ Accounting Software Register lists the accounting software that are able to meet IRAS’ technical requirements and businesses considering to use an accounting software for record keeping are encouraged to consider those in this list.

Necessity to Make Tax Adjustments

Your company's chargeable income may be different from the net profit/loss shown in its financial statements.

This is because some of your company's expenses 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.

You may also wish to claim capital allowance on your fixed assets or claim unutilised losses/capital allowances/donations brought forward from previous Years of Assessment (YA).

Types of Tax Adjustments

As a general guide for most companies, you would need to make the following adjustments to your net profit/loss:

  1. Deduct income which is not taxable
  2. Deduct investment income (e.g. interest, dividend and rental) which is to be assessed separately as non-trade income
  3. Add disallowable expenses
  4. Add direct expenses relating to the investment income (to be allowed against the respective investment income taxed as non-trade income)
  5. Deduct Section 14Q deduction for expenditure incurred on renovation or refurbishment works where applicable (only applies to qualifying expenditure incurred from 16 Feb 2008)
  6. Claim enhanced deduction under the Productivity and Innovation Credit scheme
  7. Add net investment income such as interest, dividend and rental (after deducting the direct expenses relating to the investment income)
  8. Deduct unutilised capital allowances brought forward from previous YA where applicable
  9. 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
  10. Deduct unutilised losses brought forward from previous YA where applicable
  11. Deduct unutilised donations brought forward from previous YA where applicable
  12. Deduct donations made to approved Institutions of a Public Character (IPCs) if any.

Submitting without Tax Adjustments

You are still required to submit a tax computation even if you do not need to make any adjustment to your net profit/loss, if you are filing Form C.

Example

  • All the expenses reflected in your profit/loss statements incurred are deductible for tax purposes;
  • All the income reflected in your profit/loss statements 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 financial statements. 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.

Using the Basic Corporate Tax Calculator

You may refer to our Basic Corporate Tax Calculator to prepare your tax computation

Using Third Party Solutions

You may also tap on third party solutions to help you prepare your tax computation and work out the tax payable. One example is TinkerTax*, a third-party web application which enables companies to convert their financial accounts into a tax computation. TinkerTax was developed by one of the winning teams from IRAS' Hackathon 2016.

*TinkerTax is owned and maintained by TinkerTax LLP, a third party vendor that is not associated with IRAS. If you wish to use the web application, you should do so based on independent consideration and exercise reasonable care. IRAS shall not be liable for any loss or damages arising from or in connection with your use of or reliance on the web application.

Charges apply for the use of the web application. As TinkerTax is a cloud computing service, costs incurred in YA 2018 to use TinkerTax qualify for tax benefits under the Productivity and Innovation Credit (PIC) Scheme.

Submitting with a Change in Financial Year End

You must notify IRAS of a change in financial year end either via “Update Corporate Profile/ Contact Details” e-Service  at mytax.iras.gov.sg or by submitting the form Request for Income Tax Return (Form C-S/ C) and Notification of New Financial Year End.

If your financial statements cover a period that is more than 12 months as a result of a change in financial year end, you may have to apportion and attribute the adjusted profit/losses to two different YAs.

This should be done by directly identifying the company's income and expenses to the corresponding basis period for each YA ("direct identification method"). Time apportionment basis may be used if the company is not able to apply the direct identification method.

Where the change is within the same YA (e.g. financial year end changes from 30 Jun to 31 Dec with effect from 2015), the company can prepare one set of tax computation for YA 2017 based on the accounts from 1 Jul 2015 to 31 Dec 2016.

In this case, it is not necessary to apportion the adjusted profit/losses although the financial statements cover a period of more than 12 months. The YAs and corresponding basis periods are as follows:

YABasis Period
20161 Jul 2014 - 30 Jun 2015 (12 months)
20171 Jul 2015 to 31 Dec 2016 (18 months)
20181 Jan 2017 - 31 Dec 2017 (12 months)

 

Where the change is across two YAs (e.g. financial year end changes from 31 Dec 2015 to 31 Mar 2016), the company needs to prepare two separate tax computations i.e. for YA 2016 and YA 2017.

The YAs and corresponding basis periods are as follows:

YABasis Period
20161 Jan 2015 - 31 Dec 2015 (12 months)
20171 Jan 2016 to 31 Mar 2016 (3 months)
20181 Apr 2016 to 31 Mar 2017 (12 months)

The company should:

  1. Furnish an estimate of its chargeable income for YA 2016 (basis period from 1 Jan 2015 to 31 Dec 2015) and YA 2017 (basis period from 1 Jan 2016 to 31 Mar 2016) by 31 Mar 2016 and 30 Jun 2016 respectively, unless the administrative concession on waiver to file ECI applies; and
  2. Attach the financial statements for the period 1 Jan 2015 to 31 Mar 2016 and provide a covering letter stating it has enclosed the tax computations for both YA 2016 and YA 2017, when submitting Form C for YA 2017.

If the company is submitting Form C-S, it is only required to provide a covering letter enclosing the Form C-S for YA 2017 and tax computation for YA 2016. It is not required to submit the financial statements and tax computation for YA 2017.

 

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