Why Prepare Financial Statements
2017-04-28
Application Process
2017-08-10
Why Prepare Financial Statements
2017-04-28
Application Process
2017-08-10

Corporate Tax Computation


Requirement to Submit Tax Computation

A tax computation is a statement showing the tax adjustments to the accounting profit to arrive at the income that is chargeable to tax. Tax adjustments include non-deductible expenses, non-taxable receipts, further deductions and capital allowances.

Companies should prepare their tax computations annually before completing the Form C-S/ C. Only companies filing Form C need to submit their audited/unaudited* financial statements, tax computation and supporting schedules together with Form C. Companies filing Form C-S are still required to prepare their financial statements, tax computation and supporting schedules and submit them to IRAS upon request.

 

Records and Accounts Keeping

Companies are required to keep proper records and accounts of business transactions. Using an accounting software helps business improve record keeping and comply with tax obligations. Business can also use the information captured in the software to ensure that operations are effective and efficient. The IRAS’ Accounting Software Register lists the accounting software that are able to meet IRAS’ technical requirements and businesses considering to use an accounting software for record keeping are encouraged to consider those in this list.

Necessity to Make Tax Adjustments

Your company’s chargeable income may be different from the net profit/loss shown in its financial statements.

This is because some of your company’s expenses may not be deductible for tax purposes. Similarly, some of the income received by your company may not be taxable, or it may be taxed separately as a non-trade source income.

You may also wish to claim capital allowance on your fixed assets or claim unutilised losses/capital allowances/donations brought forward from previous Years of Assessment (YA).

Types of Tax Adjustments

As a general guide for most companies, you would need to make the following adjustments to your net profit/loss:

  1. Deduct income which is not taxable
  2. Deduct investment income (e.g. interest, dividend and rental) which is to be assessed separately as non-trade income
  3. Add disallowable expenses
  4. Add direct expenses relating to the investment income (to be allowed against the respective investment income taxed as non-trade income)
  5. Deduct Section 14Q deduction for expenditure incurred on renovation or refurbishment works where applicable
  6. Add net investment income such as interest, dividend and rental (after deducting the direct expenses relating to the investment income)
  7. Deduct unutilised capital allowances brought forward from previous YA where applicable
  8. Deduct capital allowances (including enhanced allowances under the Productivity and Innovation Credit scheme) for the current YA if you wish to claim for capital allowances on fixed assets
  9. Deduct unutilised losses brought forward from previous YA where applicable
  10. Deduct unutilised donations brought forward from previous YA where applicable
  11. Deduct donations made to approved Institutions of a Public Character (IPCs) if any.

Submitting without Tax Adjustments

You are still required to submit a tax computation even if you do not need to make any adjustment to your net profit/loss, if you are filing Form C.

Example

  • All the expenses reflected in your profit/loss statements incurred are deductible for tax purposes;
  • All the income reflected in your profit/loss statements are taxable;
  • You are not claiming for capital allowances on fixed assets; and
  • There are no unutilised losses/capital allowances/donations brought forward from previous YA.

In this case, your tax computation will show disallowable items to be added back as “Nil” and the adjusted profit/loss amount will be the same as the net profit/loss as per your financial statements. You also need to show the chargeable income and the tax payable or the unutilised losses carried forward in your tax computation whichever is applicable.

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