Basic checklist on keeping accounts, preparing statement of accounts and filing income tax for sole-proprietors and self-employed persons including freelancers, commission agents, taxi drivers, private-hire car drivers and hawkers.

1. Know Your Tax Obligations

All self-employed persons must report the income earned from their business operations as business income, and not as salary. The business income is part of the total personal income which is taxed at individual income tax rates.

You are a self-employed person when you earn a living by carrying on a trade, business, profession or vocation. Generally, sole-proprietors and partners registered with the Accounting and Corporate Regulatory Authority (ACRA) are self-employed.

To check whether you are a self-employed person, please refer to Am I a Self-Employed Person.

2. Decide on the Accounting Period

Every year, you declare your business income for a specific accounting period. The accounting period is usually a 12-month period of trade for which you calculate your profits or losses.

You should decide on your accounting period when you first start your business. Most businesses choose accounting period that ends on 31 Dec each year. You may choose an accounting period that ends on any date.

Example 1: Accounting Period that ends on 31 Dec

Your business starts on 1 Apr 2018 and you choose to end your accounting period on 31 Dec. The relevant accounting periods and the respective YAs are:

S/NAccounting PeriodYA
1st Accounting Period01 Apr 2018 to 31 Dec 2018YA 2019
2nd Accounting Period01 Jan 2019 to 31 Dec 2019YA 2020
3rd Accounting Period01 Jan 2020 to 31 Dec 2020YA 2021
4th Accounting Period01 Jan 2021 to 31 Dec 2021YA 2022

Example 2: Accounting Period other than 31 Dec

Your business starts on 1 April 2017 and you choose to end your accounting period on 31 Mar. The relevant accounting periods and the respective YAs are:

S/NAccounting PeriodYA
1st Accounting Period01 Apr 2017 to 31 Mar 2018YA 2019
2nd Accounting Period01 Apr 2018 to 31 Mar 2019YA 2020
3rd Accounting Period01 Apr 2019 to 31 Mar 2020YA 2021
4th Accounting Period01 Apr 2020 to 31 Mar 2021YA 2022

3. Keep Proper Records and Accounts

You are required to keep full and accurate records and accounts of your business transactions from the start. These records and accounts must be supported with invoices, receipts, vouchers, and other documents.

IRAS will not accept estimate and improper records. For details, please refer to Keeping Proper Records and Accounts.

4. Prepare Statement of Accounts

At the end of every accounting period, you must prepare the statement of accounts comprising:

  • Profit and Loss Accounts
  • Balance Sheet

For details, please refer to Preparing Statement of Accounts.

5. Prepare a 2-line/4-line Statement

From your statement of accounts, you have to extract the relevant figures and prepare a 2-line/4-line statement for filing your Income Tax Return.

2-Line Statement

The figures that you need when your revenue is $200,000 or less from YA 2021 are:

First lineRevenue
Second lineAdjusted Profit/Loss

4-Line Statement

The figures that you need when your revenue is more than $200,000 from YA 2021 are:

First lineRevenue
Second lineGross Profit/Loss
Third lineAllowable Business Expenses
Fourth lineAdjusted Profit/Loss

For details, please refer to Calculating Business Income.

6. File Income Tax

At the beginning of the year and usually by 15 Mar, IRAS will send you a notification or an individual income tax return (Form B or B1) to report your income from business or as well as your income from all other sources.

If you do not receive the notification/income tax return from IRAS, please check your filing requirements (XLS, 55KB).

For details, please refer to How to File your Tax Return.

7. Pay Withholding Tax

Withholding tax applies to partnerships. For details, please refer to Section 45 withholding tax apply to partnerships.

FAQs

If I am doing freelance work from home, am I considered a self-employed person?

Yes. You are considered a self-employed person if you get paid for doing freelance work from home, and the money that you receive is considered your income from a trade.

Should I inform IRAS that I have registered a sole-proprietorship or become self-employed?

You do not have to inform IRAS immediately after you registered or started your business. Usually before 15 Mar, IRAS will send a notice to file your income which could be a:

  1. Letter of invitation to file
  2. Income tax return (Form B or B1)
  3. SMS message informing you to file

If you do not receive any letter, income tax return or SMS by 15 Mar, you can check your filing requirements (55KB) or contact our Taxpayer Services Officer on 1800-356-8300 for assistance.

When will my income be taxed?

Your income will be taxed in the year following the year the income is earned. For example, income earned in 2017 will be taxed in 2018.

2017 is known as the basis year and 2018 is known as the Year of Assessment.