Your company closes its books on its own financial year end. Check the date in your accounts. Many companies use 31 December, but your date is your own. Every tax date below counts from your year end, so plan in the two months before the date.
Dates to know
– Your Estimated Chargeable Income (ECI) is due within 3 months after your year end. You skip the filing when annual revenue is S$5 million or less and your ECI is nil.
– Your tax return is due 30 November of the Year of Assessment (YA).
A company with a 31 December 2026 year end belongs to YA2027. Its ECI is due 31 March 2027 and its return is due 30 November 2027.
What to settle before the year closes
– Bonuses. A deduction needs a real expense. Decide staff bonuses before year end and record the names and amounts in a director resolution. Your accountant needs this paper to book the accrual.
– Equipment. Computers and prescribed automation equipment earn 100% in one year. Other assets costing S$5,000 or less each earn 100% in one year, up to S$30,000 per YA in total. A S$12,000 machine writes off at S$4,000 a year over 3 years. Buy what the business needs inside the right year.
– Donations. Gifts to approved charities (IPCs) earn a 250% deduction until 31 December 2029. Pay before the year end and keep the receipt.
– Debtors. List every customer who will not pay. Send the list to me before closing so I assess the debt while the facts are fresh.
– Dividends. Singapore dividends reach you tax-free, and your company gets no deduction for them. Pass a written resolution before you pay, and pay only from profit. Decide this together with your salary, which I covered in my salary or dividends article.
– Start-up exemption. Check whether this is one of your first 3 YAs. The exemption covers 75% of the first S$100,000 and 50% of the next S$100,000, so a deduction is worth less in those years.
What the plan saves
Take S$150,000 of profit and S$12,325 of company tax. Approve a S$20,000 bonus and profit falls to S$130,000. Tax falls to S$10,625. The saving is S$1,700, which is 8.5% of the bonus, because the partial exemption shelters half of each dollar in this band.
The company still pays out S$20,000 to save S$1,700. Pay bonuses to reward staff, not to cut tax. The same rule holds for equipment. Buy the laptop when someone needs the laptop.
Planning has one real use, which is timing. Know your profit before the year ends, and you choose your salary, dividends and ECI figure with numbers instead of guesses.
Want me to run your numbers before your year end? Send your latest profit figure or your question by WhatsApp to +65 9876 3553 or by email to henry@cschow.com.sg.
Henry Chow
Public Accountant, C S Chow & Co