Introduction:
Estimated Chargeable Income (ECI) stands as a critical component in Singapore’s corporate tax framework. This estimate of your company’s taxable profits, after deducting tax-allowable expenses, plays a pivotal role in financial planning and compliance. The Inland Revenue Authority of Singapore (IRAS) issues preliminary Notices of Assessment, collects taxes in advance, and allows for installment payments. In this comprehensive guide, we break down the key aspects of ECI, from the necessity of filing to the intricacies of calculation and the consequences of late or failed submissions.
Do I Have to File ECI?
Your company is exempt from filing ECI in any Year of Assessment (YA) when both criteria are met:
- Annual revenue is $5 million or below for the financial year.
- ECI is nil for the YA, considering exemptions under partial tax exemption or the tax exemption scheme for new start-up companies.
When to File ECI?
Your company will receive a notification from IRAS in the last month of its financial year to file ECI. If not notified and not exempted from filing, ECI must be submitted within 3 months from the financial year-end.
How to Calculate ECI?
For ECI purposes, exclude tax exemptions for new start-up companies or partial tax exemptions. Estimate total revenue and calculate net profit to be taxed at the corporate tax rate of 17%.
How to File ECI?
ECI filing is an online process on the IRAS tax portal. Ensure authorization through Corppass to file on behalf of the company.
When to Pay for ECI?
Pay the tax payable amount within 1 month from the Notice of Assessment date unless eligible for installment payments.
How to Pay for ECI?
Two payment options are available: Payment by GIRO or Electronic Payment.
How to Revise ECI?
Use the digital service at mytax.iras.gov.sg to file a revised ECI amount.
Late Filing/Failure to File ECI Consequences:
- If late or failure to file, an estimated Notice of Assessment may be issued based on past years’ income or available information.
- Full tax amount must be paid within 1 month, without installment options.
- Late payment penalties and enforcement actions may be imposed if payment is not received promptly.
- In case of disagreement with the estimated tax assessment, file an objection within 2 months from the Notice of Assessment date, providing reasons and the revised ECI amount.
Conclusion:
Navigating the realm of ECI filing, calculation, and compliance is crucial for every Singaporean business. This guide empowers companies with the knowledge needed to meet their tax obligations timely and efficiently, ensuring smooth financial operations and compliance with IRAS regulations. Learn more of our tax compliance services here.
