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What You Need to Know About Income Tax as a Self-Employed in Singapore

April 1, 2020

It’s tax season of the year. Being self-employed, there have been times when we weren’t sure what we have to do or if we were doing things correctly.

Having been through several rounds of income tax filing, we’ve compiled a list of questions you may have about this annual administrative task.

Am i considered a self-employed?

Yes, if you:

  • Are the sole proprietor of a business
  • Are a partner in a partnership business
  • Work for yourself and earn income by buying and selling goods or providing a service

Common examples of the last one include freelancers, taxi drivers, private tuition teachers, insurance and property agents. If you work from home as a freelance writer, freelance graphic designer, freelance consultant, virtual assistant or run a digital marketing agency from home, you may be considered as self-employed too.

Chances are, if you are your own boss, you are probably self-employed.

Do I need to file my income tax?

If you need to file your income tax return, you will hear from the Inland Revenue Authority of Singapore (IRAS) in the form of a letter or an SMS.

From March 2020, IRAS will issue electronic notices instead of paper copies. Hence, you should update your contact details on IRAS’ myTax Portal to ensure you do not miss these important notifications. You can log in to myTax Portal with your SingPass.

When do I need to file my income tax?

You can check the due date for tax filing on myTax Portal. For this year, the due date is 15 April 2020 for paper filing and 18 April 2020 for electronic filing.

UPDATE: In light of the latest measures implemented to manage the COVID-19 situation, IRAS has extended the due date for tax filing to 31 May 2020.

How to file my income tax in singapore?

For a partnership business, the precedent partner will need to file Form P (for the business) to declare all income earned and business expenses deducted by the partnership for the year of assessment. This can be done on myTax Portal using CorpPass. After this, all partners will need to submit Form B (for their personal income).

If you are a sole proprietor or your own boss, you will only need to submit Form B.

What information do I need to file my income tax?

This could be the hardest part for some of you who do not keep track of your business transactions.

For Form P, you will need:

  • Revenue
  • Gross Profit/Loss
  • Allowable Business Expenses
  • Partners’ Salary, Bonus & CPF
  • Partners’ Other Benefits
  • Basis of Distribution of Profit/Loss (Partnership Allocation)

For Form B, you will need:

  • Revenue
  • Gross Profit/Loss
  • Allowable Business Expenses

What are the allowable business expenses I can claim?

The business expenses you claim:

  • Must be incurred – This means that the business has a legal liability to pay for the expense, regardless of when the actual payment is made.
  • Must be related to the business – There must be a need for you to incur this expense in order to earn the income.
  • Must be supported by documents – Keep documents such as invoices and receipts for at least 5 years to substantiate your claims.
  • Must not be capital in nature – Fixed assets such as machinery and equipment should not be counted as business expenses.
calculating

How much income tax do I have to pay?

The income tax payable will be calculated according to the table below.

From Year of Assessment 2017 onwards:

Chargeable IncomeIncome Tax Rate (%)Gross Tax Payable ($)
First $20,000
Next $10,000
0
2.0
0
200
First $30,000
Next $10,000

3.5
200
350
First $40,000
Next $40,000

7.0
550
2,800
First $80,000
Next $40,000

11.5
3,350
4,600
First $120,000
Next $40,000

15.0
7,950
6,000
First $160,000
Next $40,000

18.0
13,950
7,200
First $200,000
Next $40,000

19.0
21,150
7,600
First $240,000
Next $40,000

19.5
28,750
7,800
First $280,000
Next $40,000

20.0
36,550
8,000
First $320,000
In excess of $320,000

22.0
44,550
+ ?

Here’s an example:

If your chargeable income is $50,000, you will fall into the third bracket. For the first $40,000, you will pay $550 in tax. For the next $10,000, you will pay $10,000 x 7.0% = $700 in tax. The total tax payable will be $550 + $700 = $1,250.

What are the tax deductions I can claim to reduce my tax?

Here are some of the tax deductions you can claim. Read more about the conditions you have to fulfil in order to qualify for them.

  • Business expenses
  • Medical expenses
  • Rental expenses
  • Expenses incurred 1 year before commencement of business
  • Capital allowances
  • Business losses and unutilised capital allowances
  • Donations
make payment online

How to pay my income tax?

After filing your tax, you will receive your Notice of Assessment (NOA) from end April 2020. Once again, remember to update your contact details on IRAS’ myTax Portal to ensure you do not miss your tax bill.

The due date for paying your tax will be indicated in the NOA. There are many ways to pay your tax, such as:

  • AXS (Stations, Internet, Mobile)
  • SAM (Kiosks, Internet, Mobile)
  • Internet Banking
  • NETS at any SingPost counter
  • GIRO

Paying via GIRO gives you the option to pay your tax by monthly interest-free deductions of up to 12 months. This is a great choice for those who prefer to have an even monthly cash flow as you do not have to pay in one lump sum.

What happens if I don’t file my tax?

If you don’t file your tax by the due date, IRAS may:

  1. Impose a late filing fee ranging from $150 to $1,000;
  2. Issue an estimated Notice of Assessment (NOA); and/or
  3. Summon you to Court.

What happens if I don’t declare my income?

Tax evasion is a criminal offence. Under the Income Tax Act, any person who is found guilty of tax evasion or assisting any other person to evade tax shall:

  • Pay a penalty of 4 times the amount of tax which has been undercharged in consequence of the offence or which would have been undercharged if the offence had not been detected; and
  • Be liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 5 years, or both.

Don’t play play ah!

Another good reason to declare your income

The main reason why you want to report your income accurately is to be able to get HDB and bank loans, and to get a credit card.

In Singapore, most people don’t have the means to buy a HDB flat either in resale or BTO and pay the full sum outright. This means most people need to rely on HDB loans or housing bank loans.

In order to qualify for enough loan to cover the cost of the house, you’ll need to prove your income is able to afford your monthly mortgage. HDB and banks will ask to look at records of your salary before granting you a loan.

If you don’t report or under-report your income, you might end up not qualified for a loan – which makes owning a flat in Singapore that much harder.

The same goes to applying for credit cards. I’m not here to debate the merits of owning a credit card, but having one just in case you need to make emergency payments is good.

Most credit card companies will require at least a year’s worth of salary proof and most of them have a minimum requirement of $30,000 annual salary. Your declared income would need to meet these requirements.

frustration

What can I do to make it easier for me to file my income tax next year?

I cannot stress enough the importance of maintaining your day-to-day bookkeeping. If you do this diligently throughout the year, you will be able to come up with the numbers for tax filing easily next year.

You can either use the old school method of recording transactions in a Microsoft Excel sheet, or use an accounting software like Wave, Xero and FreshBooks. Some of these softwares are free to use and require payment only if you want to access premium features.

For us, we use Wave for accounting purposes because it’s free! We use it to issue invoices and track our business expenses so that we can easily refer to it when it is time to report taxes.

Please note: Our content is intended to be used for informational purposes only and is not a substitute for advice from a professional tax advisor.

Rin

Rin previously led a 9 to 6 desk-bound office lifestyle. After 6 years of rush hour train squeezing and lunchtime madness, she decided to make a switch and started working from home.

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Marc & Rin

We are a husband and wife team that are both working from home in Singapore. We share our experiences working from home and to impart our knowledge to others who are seeking to do the same. Learn more about us

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