A Simplified Guide to Calculating Corporate Taxable Income in Singapore
When it comes to the tax system, Singapore supports the territorial system, which requires companies within the country to pay a certain percentage of their chargeable income. The company must possess the knowledge about which items should be included or deducted to achieve an accurate calculation of taxable income.
Aside from in-house accounting and financial executives, companies also have the option to hire accounting companies in Singapore to relieve the burdens and ensure that all corporate tax filing is handled efficiently and in compliance with the country’s tax laws and regulations. From the proper definition to the different types of taxable income adjustments, this article serves as a simple yet comprehensive guide to calculating Singapore’s corporate taxable income.
What is Taxable Income Under Singapore’s Tax Regulation
According to Singapore’s tax system, taxable income is the qualifying income generated in the country as well as revenue remitted to the state via a foreign source. Examples of taxable income in Singapore are as follows:
● Profits gained from business or trade
● Revenues earned from investments, such as income from a rental property
● Profits, royalties, and premiums obtained from the property
● Other taxable incomes considered as revenues
While incomes accrued in Singapore from outside of the country are taxable, they are subjected to relevant tax exemptions and reliefs.
To accurately calculate the taxable income, the company needs to make certain adjustments on its net profit or loss account. The company has to apply these adjustments because some of its incurred expenses may, for taxation purposes, be non-deductible or taxable. There are also certain instances where the company’s income is separately taxed as a non-trade profit.
Different Types of Taxable Income Adjustments
The following are some of the examples of the different types of adjustments that the company can make.
Deduction of Non-taxable Income
Non-taxable income is deductible from the overall chargeable income. Some examples of non-taxable income include the sale of a fixed asset, capital revenues, profits obtained from foreign exchange of capital transactions, as well as other sources of income that the Singapore Income Tax Act has exempted from.
Adjustment of Net Investment Income
Investments’ incomes are non-trade gains that involve rental, interest, as well as dividend income. This type of income is evaluated distinctly due to the excess cost obtained from the revenue of one source of investment which the company cannot claim against the surplus generated from other sources of investment.
Deduction of Qualified Expenses for Business
Costs from the trade income’s production can are deductible. Some examples of expenses that are deductible are salaries, office rental fees, services expenses, and the costs for R&D. On the other hand, payments that are considered non-deductible include penalties, income tax, as well as private fees.
Deduction of Capital Allowances
The purchase of a fixed asset as well as its depreciation is considered non-deductible tax. Nevertheless, the company can request a deduction based on the capital allowance, which is the fixed asset’s wear and tears.
Deduction of Unused and Qualified Losses
Incurred losses that are qualified are deductible against the company’s income. Eligible losses pertain to either the losses derived from the carrying of the business or the losses unused previously.
Deduction of Unused Donations
The only type of donations that the company can deduct from its income tax calculation are those that the Institutions of a Public Character has approved.
Submitting Tax Computation Without Tax Adjustments
Companies that do not wish to make any tax adjustments still need to provide their tax computation if they are filing for Form C or the income tax returns. In such circumstances, the tax computation will note the disallowable items while the adjusted amount of profits or losses will be similar to that of the net profits or losses per the company’s financial statements.
The company may also need to include the chargeable income as well as the payable tax or unused losses that are carried forward in its tax calculation.
Calculating the Company’s Taxable Income with the Help of Experts
A professional accounting service provider can provide additional benefits to the company. An experienced and knowledgeable accountant can help the company manage a more efficient and optimized tax data compilation and calculation while making sure that the company does not violate any tax regulations.
When it comes to calculating taxable income accurately, knowledge on the items that can be deducted or should become included in the tax computation is of utmost importance.
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