For the self-employed and entrepreneurs in Singapore, the thought of filing taxes itself can be daunting, and can be more daunting when placed on top of other things, such as keeping the business successful.
However, there’s no need to be worried – the taxman has now simplified the process, making it easier than ever to access and use, and you can even do it in the comfort of your own home. All you need to do is follow these simple steps:
Step 1. Log into your IRAS account and look for the file form “B/B1”. For matters of business tax (which you as an entrepreneur need to do), select that option along with your SingPass (this is your online account that allows you to access government services in Singapore). Nowadays, you can even make your transaction using CorpPass.
Once you’ve logged onto your IRAS account, be sure to look for the file form under the “Individuals” tab.
Step 2. Input uncaptured income and personal reliefs. This makes it an important step when it comes to filing your taxes as you need to confirm how much you’re earning for the current year.
According to the IRAS (Inland Revenue Authority of Singapore), a person who is self-employed is someone who essentially performs work for others “under contract for a service”. For business owners, this means reporting the income that you earned from business operations.
This is considered as part of your personal income, and is taxed at the rate of an individual. The lowest taxable amount in Singapore is $20,000, with a tax rate starting at zero percent, and caps of with a twenty-two percent rate for income above $320,000.
Keep in mind that things can be different for employees and those self-employed (an employee operates under a contract of service, while a self-employed person operates under a contract for service).
Step 3. Choose your accounting period. All financial activity that happens within the span of 12 months, also called a financial or fiscal year in the business world.
Business owners need to declare their income at the end of every year, but because the starting and ending dates of accounting periods are not fixed (in fact, they can vary wildly among different businesses and companies), it’s important that you decide on a period of time where you and your business can handle it best.
For this purpose, most firms and businesses choose to end their fiscal year on December 31 and start it on January 1. As a business owner, you can either follow suit or choose to end your fiscal year on different dates.
Once you’ve chosen an accounting period, you need to prepare your statement of account, which includes, but may not be limited to, your accounts on trading, profit and loss, or even your balance sheet.
Step 4. Input any income reliefs/income tax returns that you might have. This is perhaps the most important part of the process, as you would have to confirm how much you make for the whole fiscal year. (Avoid underreporting your earnings!)
This is where your statement of account comes in. Your statement of account is something that you should already have prepared by the end of each fiscal year, and as previously mentioned, this essentially details all your finances and business transactions. There are many templates and guides that you can follow online if this happens to be your first time filing it.
The next thing you should prepare is a four-line statement, which you can prepare by gathering relevant figures from your statement of account (i.e. revenue, gross profit, allowable business expenses, etc.).
Step 5. Conclude your taxation for the year. The time allotted for filing taxes in Singapore often starts in January and ends in March. You will then be sent a tax notification or return from the IRAS once you need to send an income report for your business, as well as from other sources.
Fortunately, this is now made possible using the IRAS MyTax Portal, but you also have the option of filling out a paper form and mailing it to the IRAS office.
The Importance of Good Records
From day one of your operation as a business, it’s important that you keep accurate records and accounts from every last transaction that you go through – and that means you are legally obligated to keep those written records, from invoices, to cash register tape, to even your receipts.
It’s also important that you keep back-up copies and a reliable system to make sure these documents don’t get lost or compromised in any way. When you want to look through your business records, you may even need to have a system in place to make sure that they are in order and are easily accessible.
How Accounting Services Can Help You
Accounting services can help you take into account just about everything that goes into your business, as well as help you set in place a system as well as the adequate accounting software that your business needs in order to track where any and all aspects of your revenue, income, and expenses are coming and going.
Aside from routine bookkeeping tasks, many accounting firms in Singapore will also advise clients on how to make effective financial strategies that will advance your business or help it weather through when times can be difficult for keeping the business afloat.