Understanding ECI: What Is It And How To Submit It?
As an entrepreneur, it is reasonable and necessary to acquaint yourself with many business terms – one of them being the concept of Estimated Chargeable Income (ECI). ECI seems to be a foreign concept to numerous entrepreneurs who are not so familiar with the accounting terms of Singapore. These entrepreneurs typically do not have an idea of why and when they need to file the ECI.
Despite not being common in many countries, ECI is a vital concept that is best learned and understood, primarily if you operate in Singapore or are planning to set up a business in the island nation. Below, we share all you need to know about ECI, including who needs to file it and how.
What is ECI?
ECI is a critical piece of information that a business needs to submit to the Inland Revenue Authority of Singapore (IRAS) for the ultimate purpose of helping policymakers get a grasp on the situation of businesses and various industries in Singapore. The ECI usually contains detailed estimates of a business’s taxable income for a specific assessment year (YA) after deducting the tax allowable expenses.
In essence, ECI facilitates and improves the evaluation of industrial performance, thereby allowing the government to monitor and track the financial performance of the economy more efficiently from a macro standpoint. While business owners can submit their ECIs on their own, it is often advisable that you hire an accountant or seek the help of a Singapore accounting firm when filing the ECI.
Who is obliged to file ECI?
All companies in Singapore are obliged to submit their ECIs to IRAS within three months following the end of their financial year. Even if your company is making losses or earning no profit, you are still mandated to file a ‘NIL’ ECI. Failure to file your ECI in a timely manner will result in the issuance of a Notice of Assessment (NOA) against your business by IRAS.
The issuance of the NOA will be in accordance with the estimations of your company’s specific income in the last financial term and will be utilised as a final assessment that pertains to your taxable income. Once issued with an NOA, your company will have to pay its taxes within a month from the issuance date.
How is ECI submitted?
As mentioned earlier, the submission of an ECI is typically made with the help of an accountant or accounting firm in Singapore. Nonetheless, you can still do the filing independently, provided that you follow the submission guidelines. Per the corporate statutory requirements, it is mandatory for companies to submit an electronic filing (e-filing) of their ECIs at mytax.iras.gov.sg.
Before proceeding to the submission, here are three of the vital pieces of information that you need to have:
- Your company’s CorporatePass credentials (i.e. ID and password).
- Your company’s taxation reference number.
- An endorsement or authorisation to be your company’s approving representative to manage taxation on the CorporatePass website.
Overall, the timely filing of the ECI is essential not just because it helps your company avoid the possibility of being issued with an NOA by IRAS but also because it enables your business to contribute to the betterment of Singapore’s economic health. Due to its great importance, every budding entrepreneur and business owner in Singapore should ideally have a profound understanding of what ECI is and why it is essential.
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