Taxation

Q. What is the deadline for submission of income taxes?

A. Under the Income Tax Act, all companies are required to file in their audited accounts and Form C (companies’ tax form) by 31 July of the next year, regardless of when their accounting period ends. For example, if the year-end is 31 January 2000, the deadline is 31st July 2001. If the year ended is 31st December 2000, the deadline will also be 31st July 2001.

There are penalties for late filing.

Q. What is meant by ECI (“Estimated Chargeable Income”)?

A. Under the Income Tax Act, all companies are required to submit their estimated profits three (3) months after their financial year-end. Usually, tax agents will assist companies in submitting this through e-filing. If your company has suffered a loss, an ECI submission with “NIL” amount is still required.

If you do not submit within the stipulated time, IRAS may raise an estimated tax amount at their own discretion.

Q. When do I have to pay the tax liability after IRAS has made a tax assessment of my company?

A. You have to pay the chargeable tax within 30 days from the date on the Notice of Assessment, issued by IRAS. Even if you dispute the amount charged, you are still required to pay the tax due AND make appeal in writing within 30days upon receipt of the assessment.

If the payment is not received within 30 days, IRAS will levy late interest on the tax amount at 5%, and subsequently, at 1% every month up to a maximum of 12 months.

Q. What is the current corporate tax rate?

A. All companies (ie. Year of Assessment 2002), will enjoy partial tax exemption for profits up the first $100,000. The tax rate is approximately 11%. For profits after the first $100,000, the tax rate is 22%, flat. (which will eventually be reduced to 20%).

Please note that the tax concessions stated above are from accounting years-ended in 2001 only. (ie for Year of Assessment 2002 ).

Q. If my company has approved directors’ fees (not salary), when should the directors’ report their fees in their income tax return?

A. Directors’ fees can only be approved at a general meeting. This means that the date of the general meeting determines when the directors have to report their income. For example, if directors’ fees for 1999 are approved at the general meeting in May 2000, then the directors have to report income for the year 2000 (Year of Assessment 2001). This is regardless of whether the fees have been paid or not.

However, the treatment for director’s salary (and CPF) is different from the above. The directors’ have to report salary on a calendar basis, ie 1 January to 31 December every year. The company has to issue the form, IR8A to the directors for their salary derived during the calendar year.