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.
On this page:
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 2019 and you choose to end your accounting period on 31 Dec. The relevant accounting periods and the respective YAs are:
| S/N | Accounting Period | YA |
|---|---|---|
| 1st Accounting Period | 01 Apr 2019 to 31 Dec 2019 | YA 2020 |
| 2nd Accounting Period | 01 Jan 2020 to 31 Dec 2020 | YA 2021 |
| 3rd Accounting Period | 01 Jan 2021 to 31 Dec 2021 | YA 2022 |
| 4th Accounting Period | 01 Jan 2022 to 31 Dec 2022 | YA 2023 |
Example 2: Accounting period other than 31 Dec
Your business starts on 1 April 2018 and you choose to end your accounting period on 31 Mar. The relevant accounting periods and the respective YAs are:
| S/N | Accounting Period | YA |
|---|---|---|
| 1st Accounting Period | 01 Apr 2018 to 31 Mar 2019 | YA 2020 |
| 2nd Accounting Period | 01 Apr 2019 to 31 Mar 2020 | YA 2021 |
| 3rd Accounting Period | 01 Apr 2020 to 31 Mar 2021 | YA 2022 |
| 4th Accounting Period | 01 Apr 2021 to 31 Mar 2022 | YA 2023 |
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 Account
- 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 line | Revenue |
|---|---|
| Second line | Adjusted Profit/Loss |
For YA 2020 and before, you will need to prepare a 2-line statement if your revenue is $100,000 or less.
4-line statement
The figures that you need when your revenue is more than $200,000 from YA 2021 are:
| First line | Revenue |
|---|---|
| Second line | Gross Profit/Loss |
| Third line | Allowable Business Expenses |
| Fourth line | Adjusted Profit/Loss |
For YA 2020 and before, you will need to prepare a 4-line statement if your revenue is more than $100,000.
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 a paper Income Tax Return (Form B/B1) to report your income from business as well as your income from all other sources.
If you do not receive the notification / paper Income Tax Return from IRAS, please check if you need to file an Income Tax Return by using the Filing checker.
For details, please refer to How to file tax.
7. Pay withholding tax
When a non-resident person (including partnership with 100% non-resident partners) derives income of a specified nature (e.g. interest, royalty, director fees, technical service fees, etc.) in Singapore, such income may be subjected to withholding tax in Singapore.
In this regard, when you made such payment to a non-resident person, you are required to:
- Deduct the applicable withholding tax from the payment; and
- e-File and pay the withholding tax to IRAS by 15th of the second month from the date of payment to the non-resident.
The withholding tax rate varies according to the type of payment made to the non-resident person.
For more details, you can refer to Withholding tax.
FAQs
If I am doing freelance work from home, am I considered a self-employed person?
Yes. You are considered a self-employed person even if you operate your non-registered business 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 notification to file your Income Tax Return which could be a:
- Letter of invitation to file
- Income Tax Return (Form B/B1)
- SMS message informing you to file
If you do not receive any filing notification from IRAS by 15 Mar, you can check if you need to file an Income Tax Return by using the filing checker or contact us 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 2022 will be taxed in 2023.
2022 is known as the basis year and 2023 is known as the Year of Assessment.