How To File An Income Tax As A Sole Proprietor In Singapore

As a business owner, earning a great profit and expanding your business are certainly on top of your priority list. However, along with this, it is also necessary to know your tax obligations. Taxes are what the government imposes on its citizens and businesses as a means of raising revenue, which is, in turn, utilised to meet the country’s budgetary demands.

For this reason, businesses are required to pay their taxes on time. Otherwise, they run the risk of being penalised. The taxes that business owners are required to pay vary according to their business type. If you have a sole proprietorship business, let this article be a means as a guide on how to file an income tax in Singapore.

How your taxable income is calculated

If you own a sole proprietorship business, it is likely that you are either a small business owner or self-employed. Like any business structure, you are mandated to report your business’s income in your tax return. However, because sole proprietorships do not have a separate legal identity, sole proprietors are to be taxed at individual income tax rates.

Generally, your taxable income as a sole proprietor will be composed of income from investments like rental or interest, business expenses, and any other gains that are considered revenue. On the other hand, your non-taxable income typically includes capital gains such as those on foreign exchange or capital transactions, or any other income that the Income Tax Act exempts. 

How much to pay in taxes as a sole proprietor 

As a sole proprietor, you have the sole responsibility to account for all the income you generate from your business since this is quite beneficial during the taxation process. If you are not confident about taking this responsibility, you can also hire the services of a professional accounting firm to assist you in getting the job done.

You are then required to submit them to the Inland Revenue Authority of Singapore (IRAS) just as other businesses would. The Singaporean government has formulated a progressive income tax system for tax residents under which those who earn higher incomes must pay more taxes. Since 2017, sole proprietors in the country have been required to pay a 2 to 22 per cent income tax rate, depending on their business earnings.

Knowing when to file your income tax

Sole proprietorships in Singapore are mandated to file their income tax by the 15th of April every year. The numbers you report in your income tax should be in accordance with the financial year end you stated with the Accounting and Corporate Regulatory Authority (ACRA) when establishing your business. For instance, if you started your business on the 1st of September, 2021, then the period of your tax reporting when you file your taxes on the 15th of April, 2023, would be the 1st of September, 2021, to the 31st of August, 2022. However, do note that it does not necessarily have to end in August – rather, it depends on the accounting period that you choose.

Fortunately, Singapore makes it easy for sole proprietors to submit income tax returns. All you need to do is file Form B/B1, the same form you use when declaring your personal income tax. Everything about the process can also be done online via IRAS’ website.

Conclusion 

Just like any other business, sole proprietorships are taxed by the government. As a sole proprietor, it is your responsibility to file your income tax on time and to report all your business income or losses on your income tax return if you want to avoid getting penalised and tarnishing the reputation of your business. If accounting and filing taxes seem like complicated tasks, you can always hire an accountant or an accounting firm to do the job.

For the most efficient, accurate, and up-to-date accounting services, OneStop Professional Services is the firm you can count on! We are a leading accounting and audit firm in Singapore that offers various excellent yet affordable corporate services, including accounting, auditing, company secretary services, nominee director, business incorporation, and more. To learn more about how our services can help your business meet its requirements, do not hesitate to contact us today.