Corporation tax (IS) taxes the profits of all companies throughout the year. If your company wants to reduce the fee to be paid for this tax, there are some opportunities to take advantage of. In this post we will give you several tips, but if you need help managing your commercial accounting, continue with our Singapore corporate income tax guide.
What is corporation tax?
The IS is a direct tax levied on the income of companies and other legal entities. This means that, during the fiscal year, entities are required to pay a percentage of their profits to the Treasury annually.
Within the regulations of Singapore personal income tax guide, it is established that a return must be filed, even if the entity has not carried out activity in its tax period or has not obtained taxable income.
When you talk about the tax period, you mean time when the activities that are taxed and that are included in the company tax return are carried out. This usually coincides with the economic and commercial exercise of the company itself.
Who should pay corporation tax?
Corporation tax is required for all companies’ resident in the Singapore territory.
- Commercial companies (anonymous, limited liability, collective, labour, etc.).
- Civil companies with commercial purposes.
- State, regional, provincial and local societies.
- Cooperative and agricultural processing societies.
- Single-person companies.
- Associations, foundations and institutions, whether public or private.
- As well as other entities without their own legal personality:
- Mobiliary, real estate and money market assets.
- Venture capital funds, pensions, mortgage market regulation, securitization and guarantees.
How to calculate corporation tax?
It is very important to ensure that accounting correctly reflects the company’s economic activity. The company code accounting result is used to calculate the payable fee for is used. This is the result of revenue (sales, service delivery, etc.) less expenses (overheads, purchases, etc.).
5Tips for Reducing Corporation Tax:
Saving completely legally on this taxation is not impossible. Many companies that are not well advised miss the opportunity to reduce their quota.
Depreciation is nothing more than the reduction of assets or liabilities in the company’s accounting. There are cases where you legally have the freedom to amortize investments in the desired number of years, thus being able to save on your taxation. If your business is small, you can opt for accelerated depreciation under Singapore corporate income tax guide.
- By job creation: for start-ups that hire their first employee or for companies with fewer than 50 workers.
- For donations: If you make any donations to entities under the special patronage regime, you could save up to 40% of the donation made.
- Levelling reserve
The levelling reserve is used to compensate for future losses of companies with a turnover of less than 10 million euros per year. In this way, they anticipate the negative bases obtained within five years.
This reduction represents 10% less of the taxable profit and applies only to small companies. Therefore, taking advantage of this reservation will compensate those entities that know that they will obtain negative bases.
- Capitalization reserve
These reserves allow the tax base to be reduced by up to 10% of the increase in own funds made during the financial year and maintained within five years.
- Negative tax bases
When tax bases have been negative in previous years, you’ll be able to offset it with future profits. This is possible because there are no time limitations or expiration.
It is important to review it, because if the negative tax base is below one million bucks, you can get 100% compensation.