If you are a business owner in Singapore, you should know what an estimated chargeable income or ECI is. If you are a new in the entrepreneurial scene, then ECI is something that you should be aware of.
ECI is the estimated taxable income of your business after you deduct the tax-allowable expenses for a Year of Assessment (YA). Businesses should create their ECI at the start of the Singapore company incorporation. Excluding certain companies, all businesses in Singapore are required to file their ECI within three months from the end of their fiscal year.
If you are starting a business in Singapore, here are important information you need to take note of.
Every business in Singapore is required to file an ECI.
The Inland Revenue Authority of Singapore (IRAS) requires all businesses to timely file its ECI, except for certain exemptions. You can check out this
Failure to submit on time will result in penalties and can affect the company’s total performance record in the IRAS system.
It can be tough for new business owners to know all the ins and outs of the tax filing system. That’s why we offer an income tax filing service to get this deliverable off your list.
The IRAS sends reminders to file your ECI.
During the last month of your fiscal year, you will receive a reminder from the IRAS to file the ECI on time. This is not something to be feared. It is just a friendly reminder from the IRAS to file on time to avoid late submissions and penalties. This reminder is to help companies keep their good standing in the IRAS system.
In some cases when the companies do not receive the said notification, it doesn’t mean that they do not need to file an ECI. The IRAS reminders are just additional notices to ensure timely submission.
If you are a running new business in Singapore, you are required to inform the IRAS if your fiscal year does not end on December 31. IRAS published an
Late or non-submission of ECI can lead to penalties.
If a company fails to submit its ECI during the three-month period following the end of their fiscal year, they will receive a Notice of Assessment (NOA) from the IRAS. The NOA is based on the IRAS’ estimation of your company’s revenue for the fiscal year.
Business owners are required to pay the estimated figures in the NOA within one month following the issuance even if they object to the assessment. Non-compliance to the NOA can result in enforcement actions and further penalties.
Business owners can object to the NOA.
If business owners disagree with the IRAS’ estimated tax figure indicated in the NOA, they can submit a Notice of Objection within two months from the date of the NOA issuance through the MyTax portal.
In the Notice of Objection, business owners are required to explain why they filed the ECI late or why they didn’t file the ECI. They should also provide the revised ECI figure based on their own assessment.
There are two ways to file a Notice of Objection. Business owners can also submit their objection through an e-mail or a letter detailing the exact grounds of their objection to the IRAS assessment figures.
If IRAS does not receive a Notice of Objection, the tax assessment figures on the NOA is considered true and final and should be paid within one month following the NOA issuance. IRAS posted a guideline on how to submit objections to NOA here.
It takes a while for the Notice of Objection to be processed.
The IRAS may request additional information from the company in their review process of the Notice of Objection. The business is required to provide the additional information needed on the due dates specified by the IRAS to ensure a timely resolution. If the IRAS did not include a specific date in their request, it is important to note that the business has two months to respond to the request.
The IRAS can take up to six months to review and respond, depending on the date of your last communication. It could take longer depending on the complexity of cases. The IRAS will respond promptly if more time is needed.
Upon issuance of the decision from IRAS, the business owner is required to respond in writing if they are in agreement with the final decision on the disputed tax assessment figures. The IRAS will also include a due date when the business’ response is needed. If there are no specific dates mentioned in the IRAS’ decision letter, businesses are obliged to respond within three months. If the IRAS does not receive any response from the company, the case will be considered closed.
Companies get incentives for filing ECI on time.
The IRAS offers incentives for businesses who file their ECI properly and promptly. Companies who pay on time or even ahead can pay their taxes by installments. The earlier you file, the number of installments increases.
Many business owners in Singapore take advantage of this incentive, especially new businesses. It’s a great chance to manage your budget better. That is why IRAS encourages early filing: to avoid penalties and help companies enjoy incentives. Businesses who e-file their ECI instead of paper-filing them also enjoy higher numbers of installment options for their corporate taxes.
You can outsource the drafting, preparation and filing of your ECI.
Proper and timely filing of the ECI is one of the most important things you need to learn if you are setting up a company in Singapore. You can also outsource this business requirement to help avoid penalties that can result in damaging your business’ standing in the IRAS system.
We offer income tax filing services for businesses in Singapore. We work closely with businesses to ensure proper and timely statutory compliance.