What is a Tax Computation?
A tax computation is a financial statement that adjusts accounting profit to determine the income chargeable for tax. These adjustments include non-deductible expenses, non-taxable receipts, further deductions, and capital allowances, amongst others.
Your company must prepare a tax computation annually before submitting its Form C-S, Form C-S (Lite), or Form C.
- If filing Form C, your company must submit audited/unaudited financial statements, tax computation, and supporting schedules.
- If filing Form C-S or Form C-S (Lite), financial statements and tax computation are not required but should be available upon request by the Inland Revenue Authority of Singapore (IRAS).
Types of Tax Adjustments
The chargeable income of your company may differ from the net profit/loss recorded in financial statements due to tax regulations. Some expenses may not be deductible, and certain types of income may be non-taxable or taxed separately.
Key Adjustments Include:
- Deducting non-taxable income.
- Deducting investment income (e.g., interest, dividend, rental) assessed separately as non-trade income.
- Adding disallowable expenses.
- Adding direct expenses related to investment income (which is taxed as non-trade income).
- Deducting Section 14N expenses for renovation and refurbishment, if applicable.
- Adding net investment income (e.g., interest, dividend, rental) after deducting related direct expenses.
- Deducting unutilised capital allowances from prior Years of Assessment (YAs), if applicable.
- Deducting capital allowances for the current YA on fixed assets.
- Deducting unutilised losses or donations brought forward from previous YAs.
- Deducting donations made to approved Institutions of a Public Character (IPCs), if any.
Even if no adjustments are required, companies filing Form C must still prepare a tax computation reflecting a ‘Nil’ adjustment.
Points to Note When Preparing a Tax Computation
Change in Financial Year End
If your company changes its financial year end, you must notify the Accounting and Corporate Regulatory Authority (ACRA) via BizFile+.
- No Apportionment Required: If the change falls within the same YA, a single tax computation is sufficient.
- Apportionment Required: If the change spans two YAs, two separate tax computations are necessary, attributing adjusted profits/losses accordingly.
For Estimated Chargeable Income (ECI), the filing deadlines remain as 3 months after the financial year end, regardless of the YA:
- YA 2022 (1 Jan 2021 – 31 Dec 2021): File by 31 Mar 2022.
- YA 2023 (1 Jan 2022 – 31 Mar 2022): File by 30 Jun 2022.
For Form C-S/ Form C-S (Lite)/ Form C, the filing deadlines is 30 Nov every year. This provides companies with at least 11 months to file from the time of closing of the accounts.
- YA 2022 (1 Jan 2021 – 31 Dec 2021): File by 30 Nov 2022.
- YA 2023 (1 Jan 2022 – 31 Mar 2022): File by 30 Nov 2023.
Singapore Financial Reporting Standard for Small Entities
Eligible entities may use the Singapore Financial Reporting Standard for Small Entities (SFRS for SE) when preparing financial statements. Generally, tax computation remains minimally impacted, except for financial instruments, property, plant and equipment, research and development costs, and borrowing costs.
For further details on tax implications under SFRS for SE, refer to IRAS guidelines.