Online Sellers and Service Providers
You may have been engaging in online activities such as the following for a profit:
- Selling or renting of goods
(For example: drop shipping of goods; and delivering of goods locally)
- Provision of digital or freelance services
(For example: delivery, household services, graphic design, virtual assistant services, online tutoring, webinars and consultancies)
- Provision of online content
(Income earned may include advertising, blogging, subscription and commission)
If so, these are the essential tax information you need to be aware of.
1. How to determine if income from your online activities is taxable
Income from online activities that are undertaken on your own account for a profit is taxable. This is especially if your activities are conducted repeatedly in an organised manner like how a typical business is being run. Such income is taxable regardless whether the activities are undertaken on a part-time or full-time basis.Where the online activities are carried out through a platform based overseas, the income you derive is considered Singapore-sourced and taxable in Singapore if the business operations supporting the online activities are based in Singapore. An example is that of online sales that are made through Amazon US, where the key activities for earning the
income – such as identifying saleable products and fulfilling/coordinating orders via Amazon US – are performed in Singapore. The sale income through Amazon US would be considered as sourced in Singapore and taxable in Singapore.
In the case where the products acquired are primarily for personal enjoyment and not for resale at a profit, the subsequent disposal of such used or second-hand products are not taxable.
- Ms Amy wishes to clear her wardrobe and lists her clothes on the internet for sale. Some of the items sell for more than her buying price, some for less. The clothes put up for sale were acquired primarily for her personal use and not for the purpose of selling them for a profit. The sale proceeds from the disposal of her second-hand clothes in this instance are not taxable.
- Mr Brandon sets up a live auction online to sell some antique items from his personal collection which were acquired primarily for his personal enjoyment. During this time, he discovers that he enjoys the activity and starts looking for other antiques to sell regularly for a profit. Although he started it off with the purpose of disposing his personal collection, the subsequent buying and selling activities were for trade purposes. The income from the subsequent buying and selling is taxable.
- Ms Carol has a full-time job as an admin executive in a consultancy firm. She also offers online tutoring services on the internet. She provides tuition on weekends to earn extra income. Although Carol only provides tuition on weekends (i.e. part time basis), the tuition income derived is taxable, in addition to the employment income derived from her full-time job.
- Ms Daphne, a 19 year old student, earns a commission whenever a customer buys a product she promotes on her video channel or website. She also earns advertising revenue from her video channel. The commission income and advertising revenue earned through online affiliate marketing are taxable.
- Mr Elliot, a 20 year old student, earns subscription fees from his followers by regularly posting exclusive content such as gaming tips and tricks on a third-party platform (e.g. Patreon, Twitch, etc). Elliot’s regular income from the content postings is taxable.
2. When to file a tax return
You will need to file a tax return if you have received a letter, form or SMS from IRAS informing you to file a tax return.
Even if you did not hear from IRAS, you will still need to file a tax return if your total annual net trade income exceeded $6,000, or if your annual taxable income including your net trade income, was more than $22,000.
For the purpose of determining if you need to file a tax return, your net income (gross income less deductible expenses) from online activities will be considered as part of net trade income.
To file a tax return for your income earned in a year, login to myTax Portal from 1 March to 18 April each year.
It is an offence if you fail to file your tax return by the due date.
If you are filing your taxes for the very first time, write to IRAS by 1 March to activate your myTax Portal account.
If you are operating your online activities under a registered company, please refer to this Basic Guide for New Companies.
- My annual net trade income is $4,000 and employment income is $20,000. Do I need to file a tax return?
Yes. Although your annual net trade income does not exceed $6,000, your total annual taxable income is $24,000 which is more than the income reporting threshold of $22,000. You will need to file a tax return, even if you did not hear from IRAS informing you to do so.
- Should I file Form B/B1 or Form P?
There are different forms to file depending on whether you are an individual, sole proprietor or partner of a partnership.
- What if I have registered a private limited company to earn my online income?
You may refer to the tax filing obligations of companies via this Basic Guide for New Companies.
- Mr Brandon receives a notification from IRAS informing him to file a tax return. He will need to declare his business income from the sale of antiques in his tax return accordingly.
- Ms Carol received a notification from IRAS informing her that she is on No-Filing Service (NFS), which means that she is not required to file a return. This is because her employer, a consultancy firm, is on the Auto-Inclusion Scheme (AIS) for Employment Income and has submitted Carol’s employment income to IRAS on her behalf to be auto-included in her tax return. However, since Carol has income from providing online tutoring services, she should file a tax return to report her online tutoring income.
- Ms Daphne, being 19 years old, does not receive any notification from IRAS on tax filing. However, she will still need to file a tax return on myTax Portal if her total income from affiliate marketing exceeds $6,000. To file her income, Daphne’s myTax Portal account can be activated by writing to IRAS before 1 March. Although Daphne is considered a minor (i.e. anyone who is below 21 years of age) for tax purposes, she is earning income in her own right and her income is assessable to tax in her name. For a minor, Daphne’s guardian (e.g. one of her parents) is responsible for the tax filing of her income. While the income is assessable in Daphne’s name, the Notice of Assessment (i.e. tax bill) will be sent and addressed to her guardian.
3. How to file your tax return
i) Keep proper records and accounts of business transactions
For tax reporting purposes, you are required to set up a record keeping system to track your income and expenses from the onset so that the income earned and business expenses claimed can be readily determined. These documentary evidence must be kept for a minimum of five years, in line with statutory requirements.
If you meet all the conditions as listed on the Simplified Record Keeping Requirements for Small Businesses (PDF, 500KB), you may adopt Simplified Record Keeping. This means that you will only need to keep business records (e.g. registers, listings) and not source documents (e.g. receipts and invoices). IRAS may still request the original business records for verification purposes.
You are encouraged to adopt accounting software that are able to meet IRAS’ requirements to assist you in complying with your tax obligations. You are also encouraged to keep a separate bank account for your online business to facilitate you in identifying business transactions for tax reporting purposes.
In the event that you are unable to produce record and / or documentary evidence to support your declarations upon IRAS’ request, IRAS may adjust your income and expense claims and your tax payable may be adjusted upwards accordingly.
- Mr Brandon, who is selling antiques online, takes photos of invoices and receipts whenever he buys or repair goods, or pays for the cost of advertising; and uploads them onto an online folder. He also logs each expense and sale made on an accounting software. When requested by IRAS to substantiate his reported income and expenses claims in his tax returns, Brandon is able to produce the documentary evidence with ease.
- Mr Felix, who makes online sales through Amazon US by identifying saleable products and fulfilling/coordinating orders in Singapore, takes photos of receipts whenever he buys inventory, or pays for the cost of advertising; and uploads them onto an online folder. He keeps full record of his sales orders and also maintains a separate business bank account solely for the collection of payments from his customers. When audited by IRAS, Felix was able to readily produce documentary evidence to substantiate his reported income and expenses claims in his tax return. With that, the audit was completed expeditiously.
ii) Declare your trade income
In your tax return, you will be required to declare the total income earned from your online activities under the “Trade, Business, Profession or Vocation” section.
From your statement of accounts, extract the relevant figures and report your trade income using a 4-line statement (or 2-line statement if your revenue does not exceed a specified threshold) in your income tax return.
It is the total receipts from your online activities (e.g. sales proceeds from goods or services sold, advertising revenue, commission income etc).
You are reminded that estimates of income are not acceptable.
Gross Profit (or Loss)
It is the revenue figure less cost of goods sold.
Allowable Business Expenses
It is the total business expenses incurred wholly and exclusively to earn your trade income.
Personal, private and capital expenses are not allowable for tax deduction. For details, please refer to Business Expenses.
You are reminded that estimates of business expenses incurred are not acceptable.
Adjusted Profit (or Loss)
It is the amount arrived at after deducting Allowable Business Expenses from Gross Profit/Loss.
Examples (for arriving at “Revenue”)
- Mr Brandon earned $50,000 from selling antiques as well as $20,000 from his antiques video channel (advertising revenue) in a calendar year. He will need to declare the full $70,000 in his tax return.
- Ms Carol earned $20,250 from online tutoring services in a calendar year. She will need to declare the full $20,250 and not an estimate of $20,000 in her tax return.
Examples (for arriving at “Allowable Business Expenses”)
- In order to earn his online sales income and advertising revenue, Mr Brandon incurred $32,000 to purchase antiques for sale, and $8,000 in advertising costs. He also spent $1,000 on a personal vacation. As the first two types of expenses were wholly and exclusively incurred in the production of his business income, he can claim $40,000 as tax-deductible expenses. The expense of $1,000 incurred on his vacation break is not tax-deductible as it is a private expense.
- Mr Brandon also incurred $6,500 on his private car-related expenses (such as petrol, parking fees etc) in the course of his business. However, these expenses are not tax-deductible even though they were incurred for business purposes.
iii) Check if you have other sources of income to declare
If you have other sources of taxable income (e.g. rental income, employment income), you will be required to declare these income in your tax return.
If your employer is submitting your employment income information to IRAS under the Auto-Inclusion Scheme (AIS) for Employment Income on your behalf, you will not be required to declare your employment income in your tax return. Check if your employer is on the AIS.
iv) Claim tax reliefs and rebate
You may also claim tax reliefs and rebates if you meet the qualifying conditions.
4. How you will be taxed
Upon receiving your completed income tax return, IRAS will review the tax return and issue you with a Notice of Assessment (i.e. tax bill) to inform you on the tax payable. As an individual, your income from all sources will be assessed based on progressive rates of tax, if you are a tax resident.
- Mr Brandon, a tax resident, reported a net profit of $30,000. His net profit of $30,000 less tax reliefs will be taxed at the progressive rates of tax.
5. How to pay your tax
Upon receiving your Notice of Assessment (ie. tax bill), you must pay tax within one month from the date of the notice.
You are still required to pay the tax assessed as shown on the Notice of Assessment before the payment due date even if you have filed an objection and are awaiting the outcome. If the assessment is subsequently revised downwards, any excess payment will be refunded.
If you have difficulties paying your tax, you may work with IRAS on a suitable payment arrangement.
6. When you need to register for GST
7. Other useful information
- Compulsory contributions to Medisave
As a self-employed person, you are required to make compulsory contributions to your Medisave Account as long as you are a Singapore Citizen or Permanent Resident, and your net trade income exceeds $6,000 per annum. You will receive the Notice of Computation (NOC) of CPF Contributions from IRAS if your assessed net business income exceeds $6,000.
- Winding down your online activities
You are required to report your online income up to the date it ceases in the income tax forms for the respective Years of Assessment (YAs). If you are a foreigner, please notify IRAS of the cessation of the activities immediately.
You are also required to inform ACRA of its cessation if it is a registered business with ACRA.
- Compliance checks by IRAS
IRAS uses data from multiple sources to detect potentially errant taxpayers and conduct tax audits to ensure that income reported are correct. Failing to report your income accurately for tax purposes could result in your tax payable being adjusted upwards. There may be penalties imposed or imprisonment in more serious cases.
How do I disclose reporting errors made in previous years?
IRAS imposes reduced penalties for taxpayers who come forward with full disclosure of the mistakes uncovered from self-reviews. If you wish to disclose omissions or errors made in your past income tax returns, provide IRAS with the relevant details.
Taxes are used to develop Singapore into a stronger community; to build a better environment and a more vibrant economy; a place that Singaporeans can be proud to call home. Thank you for contributing towards nation building.