Estimated chargeable income, or ECI, is your company's own estimate of its taxable profit for a year. Most Singapore companies must send it to the tax office within 3 months after the financial year ends. Some small firms with no taxable profit can skip it. This guide explains the rule in plain steps.
What estimated chargeable income means
Chargeable income is the profit your company pays tax on. It is not the same as the profit in your accounts. You start with the accounting profit and then adjust it for tax rules.
ECI is a guess made early. You make it before your accounts are final and before your full tax return is due. The Inland Revenue Authority of Singapore (IRAS) uses it to plan your tax bill. You can fix the figure later when you file your full return.
Each year of tax is called a Year of Assessment. The profit you earn in your financial year is taxed in the Year of Assessment that follows it.
Who must file and by when
Every company must file ECI within 3 months after its financial year ends. A company with a 30 June year end, for example, should file by 30 September. A company with a 31 December year end should file by 31 March.
IRAS names a few entities that do not need to file. They include foreign universities, designated unit trusts and certain real estate investment trusts. Foreign ship owners whose local agent files a shipping return are also exempt. IRAS can also grant a waiver to a specific company.
Most small firms are not on that list. They must file unless the waiver below applies.
The waiver for small firms with no taxable profit
You do not need to file for a year if both of these are true:
- Your annual revenue for the financial year is S$5 million or less.
- Your ECI is nil for that year of assessment, before any partial tax exemption or start-up exemption.
Both tests must pass. IRAS gives three examples for a company with a 30 June year end. A company with S$5 million revenue and S$100,000 ECI must file. A company with S$10 million revenue and nil ECI must file. A company with S$5 million revenue and nil ECI does not need to file.
You decide for yourself whether you qualify. You do not need to tell IRAS. Keep your workings in case IRAS asks later.
How to work out your figure
Start with net profit before tax from your accounts. Take out income that is taxed separately, such as rental income. Add back costs the tax rules do not allow, such as depreciation. Then subtract capital allowances, which are the tax version of depreciation.
Private cars, such as S plated cars, and business cars with Q or RU plates get no capital allowance. Add the separate income back at the end, less its related property tax.
Do not subtract the partial tax exemption or the start-up exemption yourself. IRAS applies them for you. If the right figure is zero, say nil.
A few extra points help:
- Use your best current numbers. A rough but honest estimate is the goal.
- Property developers report ECI under the Completed Contracts Method.
- Ask your accountant if you are unsure about a cost.
Paying in instalments
Filing early can ease cash flow. If you file within 1 month of year end, you can pay in up to 10 monthly instalments. File within 2 months and you get 8. File within 3 months and you get 6. File after 3 months and you get none.
Instalments are paid through GIRO, the bank direct debit system. The smallest monthly deduction is S$50. Sign up for GIRO at least 3 weeks before you file so it is approved in time.
Tax is due within 1 month of the Notice of Assessment unless you pay in instalments. If your final figure is lower than your estimate, IRAS refunds the extra. If it is higher, you pay the difference within 1 month of the notice.
What happens if you file late
If you do not file in time, IRAS may issue an estimated Notice of Assessment. It can base the figure on your past income or other information it holds. Full payment is due within 1 month, with no instalments. Late payment penalties can apply, and IRAS may take enforcement action.
You can object. File your objection within 2 months of the notice date. Give your reasons for the delay and your corrected ECI.
ECI is also separate from your full tax return. Form C-S, Form C-S (Lite) or Form C is due by 30 November each year. Filing ECI does not replace that return, so put both dates in your calendar.
Filing is done online through the IRAS myTax Portal.