Have you gone through the process of making sure that your company is compliant?
According to TMF Group, Singapore happens to be the second least complex jurisdiction in Asia for doing business. Ireland is ranked as the least complex in the world while UAE ranks as most complex.
If your SME has been running for a while and still isn’t compliant with the regulatory requirements, now is a good time to do so. It will help you avoid incurring civil & criminal penalties along the road. This is especially true if your business is a fast growing one. Try taking some time to familiarize yourself with Singapore’s regulatory compliance requirements. This can help smoothen the compliance process for you and your business.
Being compliant makes it easier to do business with other businesses and investors. It is fairly easy to have a predictable timeline to fulfill the requirements. This allows your business to plan well in advance. If you contract with a good corporate secretarial service or accounting firm, they can send you accurate reminders in advance.
Annual Regulatory Compliance Requirements
When looking at the corporate compliance of your company, there are two main authorities which oversees the annual regulatory compliance of companies. Namely (ACRA) Accounting & Corporate Regulatory Authority & the (IRAS) Inland Revenue Authority of Singapore.
Preparation of Financial Statements
For the annual audit, your company would have to prepare financial statements after each financial year end.
If your company is considered a small group or small company, you won’t be required to file your financial statements, but send a declaration online instead.
To qualify as a small company or small group, you would need to comply with the following requirements.
Once incorporated, your company should be holding its first (AGM) Annual General Meeting within 18 months of incorporation. After which an AGM must be held once every calendar year or 15 months from the date of the last AGM, whichever comes first.
And if your company has any issues holding the AGM within the stipulated timeline, you could make an application for an Extension of Time (EOT) before the expiry of the due date to hold the AGM. Due to the importance of holding an AGM in a timely manner, ACRA will usually not grant more than 60 days of extension.
Unless stated otherwise, there is also no current restrictions from holding an AGM outside Singapore.
Your company should be preparing the following documents for the holding of its AGM.
- Directors’ Resolutions in Writing
- Notice to convene AGM
- Minutes of AGM
In cases where the shareholder of a company is a corporate entity, the corporation will be required to execute the necessary documentation to appoint a corporate representative to sign on behalf of the corporate entity.
The following agendas can also be discussed and approved during the AGM.
- Payment of expenses to the directors
- Re-election of retiring directors
- Re-appointment of auditors
Hiring a corporate service firm or a similar firm will help you ensure the process goes in a smooth direction with a proper estimation of the timeline.
Preparation of XBRL and filing of annual returns
After 1 November 2007, financial statements are to be filed in XBRL. With effect from 3 March 2014, the revised XBRL filing requirements under the BizFinx system apply. According to the ACRA website, filings of Option B (Partial XBRL), a filing option under the previous XBRL system (FS Manager), are no longer available.
If you are unfamiliar with financial statements & the XBRL software, you could consider seeking professional services such as that of an accounting firm.
The ACRA will also require your company to verify the following information during the process of Annual Return :
- Company’s full name and registration number
- Registered address
- Principal activities
- Company type
- Summary of issued & paid-up share capital
- Registered charges
- Information of the Directors, Company Secretary, Auditors & Shareholders
- Date of AGM & the financial period that the audited accounts follows
The appointed officer of the company or the company secretary can now file the Annual Returns online via BizFile+. Or, your company can contract a registered filing agent to file the Annual Return.
Estimated Chargeable Income (ECI)
According to the IRAS, all companies are to file their ECI within 3 months after their fiscal year except for certain types of companies. Since companies generally have their financial year end on 31 Dec, new companies are required to inform the IRAS their FY does not end on 31 Dec.
Estimated Chargeable Income is the estimate of the entire company’s taxable income (after tax-allowable expenses) for a single (YA) Year of Assessment. Other than stating the ECI, your company has to also declare the company’s revenue in the ECI Form. This is made compulsory from Jan 2017.
To enjoy a greater number of installments, you can opt for e-Filing instead of paper filing.
Is Your Company Eligible for the ECI Waiver?
As a measure of reducing compliance costs of businesses, the IRAS has revised the criteria for ECI waiver as follows:
Companies must meet both criteria 1 and 2 to qualify for the waiver to file ECI.
Other entities that don’t need to file ECI,
- Foreign ship owners or charterers for whom the Shipping Return (75KB) has been or would be submitted by the local shipping agent;
- Foreign universities;
- Designated unit trusts and approved CPF unit trusts#
- Real estate investment trusts that have been granted the tax treatment under Section 43(2) of the Income Tax Act; and
- Any other specific case granted waiver to furnish ECI by IRAS, e.g. via an advance ruling issued.
For SMEs, you are generally subjected to these taxes:
- Income Tax either in the form of corporate income tax Singapore or Singapore personal income tax on income derived from Singapore or received in Singapore from outside Singapore.
- Goods and Service Tax Singapore (GST) levied on supplies of goods and services made in Singapore and importation of goods into Singapore.(
The IRAS has been continuously implementing efforts to simplify tax policies for SMEs. Part of this initiative includes the encouragement by the authority to use the tax return Form C-S to file their income with effect from the 2013 YA.
For Singapore tax purposes, taxable income refers to:
- gains or profits from any trade or business;
- income from investment such as dividends, interest and rental;
- royalties, premiums and any other profits from property; and
- other gains that is revenue in nature.
Deductions such as business expenses, capital allowances and reliefs can be claimed to reduce taxable income, which leads to lower taxes.
These are the expenses you have paid to run the business like advertising, wages and building maintenance. Certain expenses are tax deductible while others aren’t.
According to IRAS, deductible business expenses are expenses ‘wholly and exclusively incurred in the production of income’.
To qualify as deductible, they must satisfy all these conditions:
- Expenses are solely incurred in the production of income.
- Expenses are not a contingent liability, i.e. it does not depend on an event that may or may not occur in the future. In other words, the legal liability to pay the expenses must have arisen, regardless of the date of actual payment of the money.
- Expenses are revenue, and not capital, in nature.
For a list of non-deductible business expenses you can go here.
The beginning of any business is always one of the messiest stages. Hence it is common to overlook certain regulatory requirements. However, it definitely pays to keep in touch with times to avoid heavy penalties in the future.
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