What is the Estimated Chargeable Income (ECI)?
ECI is the estimated calculation of a company’s taxable income (after the allowable tax expenses are deducted and before deducting the exempt amount) for a Year of Assessment (YA).
Type of revenue to declare in the ECI
In the ECI returns, the company is required to report its annual revenue.
This statement of revenue becomes mandatory from January 2017.
The revenue declared relates to the company’s primary income and it does not include the profit on disposing of plant and equipment.
For instance, the investment holding company would report their income as the investment revenue (e.g. dividend and interest income).
If audited financial statements are not available, the company can use its management accounts to declare the revenue.
Compulsory e-Filing of ECI
The mandatory e-filling of CIT Returns (such as Form C-S, Form C and ECI) are in stages starting from YA 2018 to YA 2020.
The change in filing was announced in the Budget 2016 to comply with the Government’s objective to increase cost-effectiveness in delivering public services.
This also takes into account the Smart Nation vision that aims to use technology in an attempt to enhance productivity.
The phased approach has been used to make it easier for small companies to ease into e-filing and modify their processes.
Update in Corporate Income Tax (CIT) Rebate – Budget 2020
The Minister for Finance declared the FY 2020 CIT rebate, at 25% of tax payable and cap at S$15,000 per company.
Corporate Income Tax (CIT) Rebate – Budget 2018
The Minister for Finance declared the cap for the CIT rebate to revise from S$15,000 (YA 2018) to S$10,000 (YA 2019).
The revised percentage of the tax rebate is at 20% for YA 2019, previously at 40% for YA 2018.
A company is not required to include the CIT Rebate when completing the ECI as IRAS will automatically take this into account.
IRAS has begun to modify a company’s tax assessment for ECI that have already filed and issue an Amended Notice of Assessment (NOA) to calculate the change in CIT rebate.
Any companies affected by these changes are expected to receive an updated NOA and an appropriate refund for the extra tax paid.
For the company that is not required to pay tax on ECI by instalments, an adjusted instalment plan will be sent to the company with the updated NOA.
ECI filing options
ECI has a choice of two filing options. With e-Filing becoming mandatory from YA 2018, companies are encouraged to adopt this e-process as soon as possible.
When should we file ECI?
Every company has to file its ECI within a period of 3 months from the end of the financial year.
However, this does not apply to companies that are not specifically required to file or those that qualify for the administrative concession.
A company will get a reminder from the IRAS to return the completed ECI at the end of the financial year.
Companies should plan to automatically file their ECI within three months of the fiscal year-end even if the company does not receive the official reminder.
Benefits to e-File ECI
Any company that adopts e-Filing for their ECI can enjoy:
1. Greater payment flexibility with a higher number of instalments to pay the estimated tax; and
2. Instant confirmation after submitting a successful e-File
The instalment payment option is only open to companies that have an existing GIRO arrangement.
Any company that does not yet qualify for GIRO for Corporate Tax are recommended to apply for the necessary arrangement at least two weeks before planning to e-file their ECI.
In the event the GIRO arrangement is not organised by the time the payment is due, a company will not be in a position to make the instalment payments and must pay the entire lump sum of the estimated tax by the due date of payment.
After the IRAS process the ECI, IRAS issue an NOA to the company which states the exact amount of tax payable.
IRAS will issue NOA even if the company files a “Nil” ECI.
Upon receiving the NOA, the company should pay the tax due within one month unless there is an existing GIRO instalment arrangement with IRAS.
The NOA states the applicable payment methods. All Singapore incorporated companies have the option to apply for the GIRO instalment plan.
Benefits of filing ECI on time (within 3 months after Financial Year End)
1. Option to pay taxes by instalments
Singapore companies that submit the ECI on time can elect to pay their corporate tax bill by instalments.
IRAS encourages early filing with an incentive of having a higher number of instalments.
2. Higher instalments for e-filing
Singapore companies that e-file the ECI on time (other than the paper method) have the option of a higher number of payments.
If the company declares a lower chargeable income in the Final Tax Returns than the ECI, IRAS will refund the tax paid above the required amount.
However, if the income noted in Form C-S or Form C is higher than the ECI, the company should pay the outstanding tax balance within one month period from the date of NOA.
In situations where there is a significant difference between the ECI and the chargeable income in Form C-S or Form C, IRAS may request the company to provide a reason for the difference.
Waiver of the requirement to file ECI
The IRAS strives to minimise costs for businesses by revising the criteria for an exemption to submit ECI.
This includes:
1. Companies do not need to file ECI for the financial year ending before June 2017 if the total revenue for the year is less than SGD 1 million and the ECI* is nil for the YA.
2. Companies do not need to file ECI for the financial year ending after July 2017 if the total revenue is less than SGD 5 million and the ECI* is nil for the YA.
* ECI is calculated after deducting the allowable tax expenses and before deducting the exempt amount.
It is the company’s responsibility to establish whether or not they meet the needs of the waiver of the requirement.
Any company that meets the above criteria is not required to file the ECI for the relevant year and there is no requirements to inform IRAS.
For companies that do not meet the relevant criteria, it is necessary to file the ECI for the financial year.
Should you need assistance or would like to learn more about Tax Services in Singapore, please send an email to Contact@AccountingSolutionsSingapore.com, and our tax advisor will contact you.