As the Singapore income tax season approaches, your small business will start to prepare for income tax filing. While navigating the IRAS income tax regulations can be intimidating, filing your taxes timely is crucial. With careful planning and organisation, your business can ensure compliance while optimising your financial situation.
If you are a new business owner and would like to find out more about the IRAS income tax process, our previous article talks about a step-by-step filing process to guide you through.
Filing income tax doesn’t have to be a stressful ordeal. By following these simple tips, you can streamline the process and ensure a smooth filing experience.
Keep Impeccable Financial Statements
The most efficient way to facilitate estimated chargeable income calculation and make your overall Singapore income tax filing process easier would be to ensure the accurate upkeep of your financial statements.
With proper documentation and timely recording of your business transactions, you will be able to determine your exact revenue and expenses at any point in time. You will also benefit from understanding the financial position of your business, which is crucial before making important decisions such as taking up a business loan.
The key to a stress-free tax season lies in preparation. Here is how to stay on top of things:
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- Gather and classify receipts: Keep receipts for work-related expenses, charitable donations, medical bills, and other potential deductions throughout the year. Categorise them clearly for easy access when filing.
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- Maintain digital copies: Consider scanning receipts or using a dedicated app or cloud solution like Google Drive to store digital copies. This ensures you don’t misplace physical documents.
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- Track investments and loans: Keep records of investment statements, student loan documents, and any grants received.
Separate Personal And Business Finances
Proper recording of transactions involving you and your small business should be made to ensure that there is a clear line drawn between your personal finances and the finances of your business. Not only does this help with streamlining the income tax filing process, but it also helps to prevent confusion and avoid any misreporting of your business’ estimated chargeable income or taxable income.
Ensuring compliance with the Income Tax Act and IRAS regulations is just one such benefit, read our earlier article to uncover other benefits you may enjoy from drawing this financial boundary between work and self. You can also find out more about how to file income tax in Singapore.
Stay Informed About Income Tax Reliefs
Familiarise yourself with your tax bracket and the deductions and credits you might be eligible for. Income tax reliefs can also help your business optimise its financial situation since the income saved can be channelled into more profit-generating activities instead. For instance, business owners may consider the CPF top up tax relief where they may be granted income tax relief of up to $8,000.
As a business owner, allowable business expenses indirectly help to reduce income tax since deductible expense can reduce taxable income. Some allowable business expenses include:
- Employee/staff costs such as compulsory CPF contributions, medical expenses, insurance policy premium
- Finance and professional costs such as accountancy fees, hire purchase interest, interest on loans for use in business
- Running costs such as advertising, business licence renewal fee, up keeping of business premises, equipment and machinery
Resources like IRAS’ website (https://www.iras.gov.sg/) offer valuable guidance. This knowledge can help you maximise your tax return.
Embrace Electronic Filing
The Inland Revenue Authority of Singapore (IRAS) strongly encourages electronic filing (e-filing). It’s:
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- Faster and more convenient: No more paper forms or mailing! E-filing allows for swift submission and reduces processing time.
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- Secure and accurate: IRAS’ e-filing platform ensures data security and minimises errors during submission.
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- Accessible 24/7: File your taxes at your own convenience, anytime, anywhere.
Plan Ahead For Future Income Tax Filing Periods
The final step is to plan ahead for your next income tax filing period. For instance, standard operating procedures for documentation and financial statement preparation can be established to ensure effective financial planning and avoid tax implications.
Business owners should also understand the tax implications of future business decisions such as expansion or investments, and establish a concrete plan before committing to them.
You should also be aware of important tax deadlines depending on your business structure (sole-proprietorship, partnership or corporation) and financial year-end. For example, the company secretary should file income tax after receiving the NOA (i.e. within 1 month from the date of the NOA). You can prepare the necessary documents in advance as part of the income tax process to ensure timely compliance.
Ultimately, whether to sustain your business or to enforce future business decisions, the need for funds will always be a worry. Here at Poss, we understand the struggle of being an SME business owner and we want to ensure an easy and seamless experience when securing a business loan. Contact us today for a non-obligatory quote and application.
