Most tax trouble in a small company starts with a habit. Here are six, with the fix for each.
1. Filing ECI and returns late
ECI is due within 3 months after your financial year end. The return (Form C-S Lite, C-S or C) is due on 30 November of the Year of Assessment, so 30 November 2026 for YA2026. Late filing brings composition of up to S$5,000, a court summons or an estimated assessment payable within one month. Put both dates in your calendar when you close the year.
2. Charging private costs to the company
IRAS allows a deduction only for costs incurred wholly and exclusively to produce income. Family holidays, household bills and personal shopping fail this test. So does the running cost of an S- or RU-plated private car, which IRAS adds back to your income. Keep personal spending on your personal card.
3. Keeping thin records
Without invoices, receipts and bank statements, IRAS estimates your revenue and disallows your claims. A fine of up to S$5,000 follows under the Income Tax Act or the GST Act. Keep tax records for at least 5 years. Electronic copies are fine, and paper originals are not needed once you hold the scan.
4. Losing the start-up exemption by accident
A company in its first three YAs enjoys a bigger exemption, but only while the company has 20 or fewer shareholders, with either all shareholders as individuals or at least one individual holding 10% or more of the ordinary shares. Investment holding and property development companies do not qualify.
Take chargeable income of S$100,000. With the start-up exemption, S$75,000 on the first S$100,000 is exempt, leaving S$25,000 taxable and S$4,250 of tax at 17%. Under the partial exemption, S$52,500 is exempt, leaving S$47,500 taxable and S$8,075 of tax. One shareholder change costs S$3,825 in a year.
5. Treating director withdrawals as salary
Money moved to your personal account with no payroll entry and no dividend resolution becomes a director’s loan. Tax and audit problems follow. Run salary through payroll and file CPF and IR8A on time. Pay dividends only out of profit, and pass a written resolution first.
6. Expensing equipment
Capital expenditure is not deductible in the year you pay. You claim capital allowances instead. The standard write-off runs over 3 years, one third a year. Computers and prescribed automation equipment earn 100% in one year. So do assets costing S$5,000 or less each, up to S$30,000 in total for the YA. Group your purchases by cost so you claim the correct allowance.
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