Welcome to the exciting world of business! As a fresh new player in Singapore's bustling entrepreneurial landscape, you might find the filing requirements for small businesses a tad daunting. But fear not, for we are here to shed some light on the subject.
Firstly, Singaporean regulations mandate specific annual filing requirements, no matter the size or structure of your business. On the bright side, Singapore's obligations are relatively straightforward as compared to other countries. Of course, with the mountain of other considerations one must juggle, it is highly possible for even the savviest of business folks to let a deadline slip through the cracks which can result in some nasty fines and penalties!
This is why it is crucial to get a grip on compliance standards and develop a solid strategy to meet them head-on. In this regard, we've got your back! We've prepared a nifty guide that will walk you through the filing of annual return requirements for small businesses in Singapore. Consider it your secret weapon to navigate this process with ease and finesse.
Annual Filing Requirements for Small Business in Singapore
When it comes to regulatory matters, there are two key government bodies you need to keep in mind:
- Accounting and Corporate Regulatory Authority (ACRA)-- The national regulator that keeps a close eye on all corporate entities in Singapore. They are essential in ensuring compliance and maintaining a healthy business ecosystem.
- Inland Revenue Authority of Singapore (IRAS)-- They oversee tax collection and more importantly, set the timeline for annual filings. They play a vital role in making sure businesses like yours stay in line with tax obligations and meet the necessary deadlines.
Are You a Small Business Owner in Singapore?
Let's dive into the world of small businesses in Singapore and understand what some considerations are. If you own a private limited company in Singapore, you might be eligible for the coveted small company classification, for it comes with some perks! Listed firms are considered major organizations, which means they automatically fall under the yearly statutory audit requirement. However, small businesses in Singapore often enjoy an exemption from this requirement.
How do you determine if a company qualifies as a small business? Well, the factors mainly revolve around the company's assets, revenue, and personnel count.
A business is considered small if it meets at least two out of three specific requirements for audit exemption in the most recent two financial years:
- It employs less than 50 people
- It has less than S$10 million in assets
- It has a total annual revenue of less than S$10 million
So, if you meet these criteria, you are eligible to skip that audit process!
Yet, even if it qualifies as a small business, there is still a risk that a company can be disqualified from that position. Disqualification happens when:
- The corporation ceases to be private at any point during the fiscal year.
- The business fails to satisfy at least two quantitative requirements for the past two fiscal years.
Preparation of Unaudited Financial Statements
Now, let's talk about the power of financial statements and how they play a vital role in decision-making and communicating with shareholders. When it comes to compiling your yearly financial statements, it's crucial to align them with the Financial Reporting Standards of Singapore. These standards ensure consistency and accuracy, giving you a solid foundation to assess your company's financial performance throughout the accounting year.
Monthly bookkeeping is highly recommended to keep your ledgers organised, especially if you must deal with a medium to high volume of accounting transactions regularly.
If your small business sees relatively fewer transactions each month, you have the option to prepare quarterly financial statements. However, the best practice is still to maintain a monthly financial ledger. This will give you a clear snapshot of your finances, showcasing your income and outgoings when filing time rolls around.
Four key elements of information that a small business in Singapore should include in their financial statements would include:
- Statement of changes in equity
- Cash flow statement
- Profit and loss accounting
- Balance sheet
Annual General Meeting (AGM)
Congratulations on having your financial statements ready! Now it's time to put them to good use during your Annual General Meeting (AGM)! AGM is a mandatory annual meeting involving shareholders of a company and company executives. It serves as a platform for a company to present financial statements (This is where audit reports come in handy!) to shareholders and answer any pressing questions regarding the company's financial position.
A company is required to hold its first AGM within 18 months of incorporation. Subsequently, AGMs must be held once in every calendar year and not more than 15 months after the last preceding AGM.
However, there are exceptions! Working in a private company? You can now be exempted from (or in other words dispense an AGM if you send in your financial statements to relevant members within 5 months post financial year-end. However, how do you decide if you should dispense an AGM?
Well, the decision to dispense an AGM is ultimately up to the members with voting rights. Do take note that this decision should be pondered upon well, as it is a personal choice largely dependent on different companies’ structures. While dispersion might provide some administrative convenience, this should not be a deciding factor to blindside the value of getting together to discuss important issues, making crucial decisions, and updating shareholders on the company's affairs. The importance of AGM in promoting transparency, accountability, and engagement among stakeholders should certainly not be overlooked!
Relevant Filings for Small Businesses
Annually, every company must submit an electronic Annual Return (AR) to ACRA to ensure the accuracy of fundamental data. The filing of the annual return should encompass the following details:
- Name of the Business and Registration Number
- The Main Activities
- Address for Registered Office
- Information about Company Officers (Directors, Secretary)
- Information on Shareholders, Share Value, etc.
A company secretary or a director of the company must sign the annual report. The following are the key considerations when filing an annual return:
- When a company files an annual return with ACRA, it must include its audited financial statements (if applicable).
- Filing of annual returns should not be later than 30 days following the AGM date. In some circumstances, a company may be able to file its annual return without holding an AGM.
- It is not mandatory for small businesses to attach their financial statements.
Filing of Annual Tax Return with IRAS
In Singapore, it is a legal requirement for all companies to submit their annual return to IRAS by November 30th each year. The tax calculation in Singapore follows a preceding-year basis, which means that the tax obligations for the current year are determined by the profits reported in the previous financial year. In other words, these reported profits from the previous year serve as the foundation for your tax assessment and reporting in the current year.
Filing of Estimated Chargeable Income (ECI) for Small Businesses in Singapore
Now, it's time to tackle the important task of reporting your Estimated Chargeable Income (ECI) to IRAS as part of your filing annual return documentation. ECI refers to the estimate of your company's profits that can be taxed (excluding taxable expenses) for the Year of Assessment (YA). From the end of a financial year, one has three months to submit ECI, so do take care not to let the deadline slip by and avoid penalties!
With some small businesses, it is possible to have neither gained profits nor incur losses, resulting in an ECI of zero. Yet, this does not mean that a company can be exempt from submitting ECI. You will still be required to complete the relevant form accurately and indicate 'Nil' as your ECI when prompted. It is as simple as ABC!
When you visit the IRAS website, you might come across a status message "Ready to File" for your company’s ECI for the relevant YA. However, if you qualify for the ECI filing waiver, you are exempted from submitting the ECI. Only in such cases, you are not required to seek confirmation from IRAS or inform them about the waiver. The exemption is automatically recognized, and you can proceed without any further action.
Who Is Responsible for These Filings?
Firstly, the company secretary bears the ultimate responsibility for ensuring that filing annual return practices activities are carried out in accordance with the recommended practices and deadlines previously emphasised in this article, as well as the official guidance from the Singapore government.
Moreover, company directors also share the responsibility for the smooth filing of annual returns. Any delays, shortcomings, or dishonest behaviour flashed out during this process can have severe consequences on the offender where it can result in financial penalties, fines, and even escalate to prosecution and potential imprisonment.
Therefore, it is essential for both the company secretary and directors to diligently adhere to the prescribed guidelines to maintain compliance and avoid the potential legal ramifications associated with the breaches of the filing process.
Consequences for Failure to Comply
Failure to File Annual Returns with ACRA
When it comes to fulfilling the requirements set by ACRA, companies need to stay on top of their game. This is especially due to the increased severity of enforcement laws by ACRA. In the event of non-compliance of the following grounds, companies risk a $300 penalty per violation. These include:
1. Not holding the AGM on time.
2. Missing the deadline for submitting the annual report and financial accounts.
3. Having outdated financial disclosures during the AGM.
Failure to File Tax Returns with IRAS
When it comes to submitting your ECI, timing is crucial. Let’s imagine you are running a company, and if you fail to submit your ECI within three months of the financial year’s end, IRAS will step in.
A Notice of Assessment (NOA) containing an estimated income for your company will be handed to you. If you don't agree with their assessment, you have a window of less than two months to submit a Notice of Objection (NOO) and let them know why you think they got it wrong.
However, if your actual income on the tax return turns out to be lower than their estimate, IRAS will consider that the final verdict.
Therefore, it's essential to keep an eye on those deadlines and speak up if you believe they didn't quite hit the mark!
Compliance Made Easy With Grof
While this article has streamlined the requirements for small businesses in Singapore, we understand that the abundance of stringent rules and regulations can still feel overwhelming for business leaders and entrepreneurs looking to grow their small business.
Rest assured-- you don't have to navigate the complexities of annual return filing on your own! At Grof, we have a team with extensive experience dedicated to support businesses like yours. Whether it is understanding tax obligations or staying on top of filing laws, we're here to help you succeed.
Reach out to us today to explore how our services can assist you on your journey! Together, we can navigate the intricacies of compliance and ensure your business thrives in dynamic business landscape of Singapore.
