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  2. A Complete Guide to Filing Estimated Chargeable Income

A Complete Guide to Filing Estimated Chargeable Income

A Complete Guide to Filing Estimated Chargeable Income

As part of your annual filing requirements, you may be asked by your accountant, or accounting services provider to file your Estimated Chargeable Income. If you have questions on what this means, you’ll have your questions answered in this article.

What Is Estimated Chargeable Income (ECI)?

ECI is the estimated taxable income after considering all the necessary tax adjustment and allowances for a Year of Assessment (YA). It is filed within 3 months from the end of your company’s financial year-end.

This is then compared to the chargeable income stated in Form C-S or Form C. If your declared income in the Form C-S or Form C is less than in ECI and results in a lower tax payable, IRAS will refund you the taxes. However, if your declared income is more than what was stated in the ECI and results in a higher tax payable, you will need to pay IRAS within a month.

Which Companies Need To File ECI?

All companies, whether newly incorporated or have been around for years will need to file ECI starting 2021 onwards. The process helps the IRAS conduct an early evaluation of corporate performance on Singapore companies as a whole. The Singaporean government also makes use of this information to keep an eye on business health and make sure the company is being taxed fairly.

The Singapore government has rolled out a phased approach for compulsory ECI filing:

YA Target Group for Compulsory e-Filing
2018 onwards Companies with revenue more than $10 million in YA 2017
2019 onwards Companies with revenue more than $1 million in YA 2018
2020 onwards All companies

To check if you must file, you can use the New Company Start-Up Kit from the IRAS.

There are also exceptions to which companies need to file ECI.

Which Companies Don’t Need To File?

Your company does not need to file the ECI for that particular YA if it meets both criteria. We repeat, your company needs to tick both checkboxes:

  1. Annual revenue is not more than $5 million for the financial year AND
  2. ECI* is NIL for the YA.

What Happens if I Am Not Exempted, and I Still Don’t File?

If you are not exempted from filing and you do not file by the deadline, you will receive a Notice of Assessment from IRAS based on their estimation of your business’ income. If you think this is an unfair calculation, you will still be a given a chance to object. However if you do not inform IRAS of your objection at all, this amount in the NOA will be the final ECI amount you have to pay. At the end of the day, it’s better to keep open communication with IRAS and just file on time. We know you can be busy with running and growing your business but that’s what we’re here for. Leave the burdensome paperwork to us.

What Details Are Needed When Filing ECI?

You will need to declare your company’s revenue on top of the estimated chargeable income amount. To show this, include your company’s unaudited financial statements. If you don’t have that, you can refer to your company’s management accounts.

How To Calculate ECI

All right, now that you’ve realised you have to file your ECI, let’s go through how to calculate it.

Step 1: Calculate Net Profit Before Tax

Line S$
Sales S$ 100,000
Less: Cost of goods sold S$ 40,000
Rental Income S$ 2,000
Gross Profit S$ 60,000
Advertisement S$ 10,000
Depreciation S$ 500
Directors’ fees S$ 12,000
Printing and Stationery S$ 100
Property Tax (rental property) S$ 400
Salaries S$ 26,000
Secretarial Fees S$ 300
Water & Electricity S$ 1,000
Net Profit before Tax S$ 11,700

How To Calculate ECI: Step 2 | ECI Example

Let's assume your company bought S$500 worth of desks for the office and a S$1,500 laptop.

Line S$
Net Profit before Tax S$ 11,700
Rental Income S$ 2,000
Depreciation S$ 500
Property Tax (rental property) S$ 400
Adjusted profit before Capital Allowances S$ 10,600
100% Write-Off for Low-Value Asset - desks S$ 500
100% Write-Off in One Year for Laptop S$ 1,500
Adjusted profit after Capital Allowances S$ 8,600
Rental income (net of Property Tax for rental income) S$ 1,600
Estimated Chargeable Income (before exempt amount) S$ 10,200

How To File ECI

First, go to my Tax Portal.

Next, you need:

  1. Your company’s authorisation and approval
  2. Your company’s Tax Reference Number
  3. Your CorpPass ID and password

Tip

We recommend that you submit your applications through e-filing and early because it results in the fastest processing times, and you get a higher number of instalments to your company.

Pay Taxes in Instalments When You File ECI Early

You can pay your corporate taxes in instalments when you fulfil the following conditions:

  1. Your company is registered in Singapore
  2. Your company is already on GIRO. If you do not have an existing GIRO arrangement for Corporate Tax, you can apply for it at least 3 weeks before e-Filing your ECI.

Additionally, when you file your ECI on time and you already on GIRO, that is within 3 months from the end of your financial year, IRAS will automatically qualify you for 2 more months of interest-free instalment.

You need to make sure that your ECI has been filed according to these terms:

  1. Filed during the period from 19 Feb 2021 to 31 Dec 2021 (both dates inclusive); OR
  2. before 19 Feb 2021 and the company has an ongoing instalment payment to be made in Mar 2021.

Here’s what your tax instalment plan would look like if you qualify for the extension of 2 months.

No. of Instalments Given
First ECI e-Filed within Current instalment plan Extended instalment plan for qualifying companies
1 month from financial year end 10 12
2 months from financial year end 8 10
3 months from financial year end 6 8
After 3 months from financial year end No instalments allowed No instalments allowed

Enjoy Corporate Tax Rebate When You File ECI Early

On top of extending your tax payments, when you file your company’s ECI early for the YA 2020, you’ll also be granted a Corporate Income Tax rebate of 25% of the corporate tax payable, subject to a cap of $15,000.

When You Just Need Help With ECI

This article has covered all that you would need to know regarding ECI. If you’re at wits’ end and need to unload the work of calculating ECI and filing it, we can help you with it.

By the way, we can also take over all your paperwork automatically for tasks like bookkeeping and corporate secretarial tasks in Singapore so that you can focus on growing your business, like a founder should.

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