How to calculate Corporate Tax in Singapore?

For corporate income tax purposes, a company is considered to be:

First of all, your company is taxed on the income earned in the previous financial year. This means that income earned in the year 2021 will be taxed in 2022. In corporate tax terms, 2022 is the year of assessment (YA), as this is the year in which your business’ income is taxed.
Then, in order to determine the amount of your corporate tax, IRAS looks at the income, expenses, etc. for the fiscal year. This fiscal year is called the “base period” and is generally a 12-month period prior to the tax year.
Finally, the fiscal year end is determined by your company based on what is most appropriate for its business operations. IRAS does not determine the fiscal year end for businesses, but if you decide to change your business’ fiscal year end, the change must be filed with the Accounting and Corporate Regulatory Authority (ACRA) via BizFile+. IRAS will then update its records based on the information submitted to ACRA.

Taxable income means the taxable income of your business (after deducting taxable expenses) for a year of assessment (YA). Generally, taxable income is income accrued in or from Singapore or received from outside Singapore. For example, income from a business carried on in Singapore is considered to be accrued in or derived from Singapore.
Thus, such income can be various such as:

Various tax incentive schemes exist to encourage investment and trade in the country (see the full list on the Internal Revenue Authority website).
Certain types of income are specifically tax deductible under the Income Tax Act of 1947, subject to certain conditions. These include:

1. Business expenses: In effect, expenses may be deducted if they are in the nature of income and are incurred wholly and exclusively for the purpose of producing income. They must meet the following conditions:

2. Unused losses: In Singapore, qualified losses may be deducted from income. Qualified loss means, first of all, a loss from the operation of a business that has not been previously utilized. This deduction is made on a “prior year” basis, i.e. the deduction is allowed in the year or years following the year in which the loss was incurred. In the event that losses cannot be fully adjusted in the year of assessment, the remaining amount may be carried forward to the next year of assessment. These losses can be carried forward indefinitely, subject to certain conditions.

3. Unused donations: Only donations made to approved institutions of a public nature may be deducted for the purposes of calculating the company’s tax.

Other income is totally exempt from taxation, such as

4. Dividends, branch profits and foreign service income received by a resident company under section 13(8) of the Income Tax Act of 1947.

5. Gains realized by a company on the disposal of equity interests under section 13W of the Income Tax Act 1947:

6. Taxation of capital gains: Singapore does not tax capital gains. Gains derived by a company from the disposal of ordinary shares between June 1, 2012 and December 31, 2027 will not be taxed if the company has held at least 20% of the issuing company’s ordinary shares for a continuous period of at least 24 months prior to the disposal (the corporate tax exemption does not apply to insurance companies or to disposals of securities of certain companies that trade or hold real estate).

7. Income from new start-ups:

In Singapore, companies benefit from an attractive corporate tax system because they are not taxed very much. Indeed, Singapore corporate tax is based on your company’s profits and not on income, after tax adjustment.
Currently, corporate tax is 17% on profits of SGD 300,000 (Singapore dollars) or more, and 8.5% below that.
However, companies can benefit from a 75% exemption on the first SGD 10,000 and a 50% exemption on the next SGD 190,000. The total exempted income will then be SGD 102,500.

Your company must first prepare its tax calculation each year before filing its Form C-S, Form C-S (Lite) or Form C. In order to calculate the corporate tax, every company must refer to the Basic Corporate Income Tax Calculator (BTC). It is an Excel workbook designed to guide businesses in preparing their tax calculations and schedules when filing their corporate tax returns. It includes explanatory notes to guide taxpayers through their tax calculations and validation checks against common errors.
Also, you can refer to the following templates for guidance on how to prepare the tax calculation for specific industries:

In addition, companies that prepare their financial statements in functional currencies other than the Singapore dollar must prepare their tax calculations in the same functional currency other than the Singapore dollar. Nevertheless, all amounts reported in the corporate tax return must be expressed in SGD.
Finally, the method of calculation is simple: deduct the deductible expenses from the profits to obtain the income subject to tax:
1. If profits/gains/investments: SGD 80,000

2. If business expenses: 15,000

3. Deductible unused losses: 7,000

4. Unused deductible donations: 3,000

5. Income subject to tax (“taxable income”) = 80,000 – 5,000 – 7,000 – 3,000 = SGD 65,000.