Maximising Tax Deductions for E-commerce Businesses in Singapore: Your Go-To Guide to Smarter Savings

In Singapore’s dynamic e-commerce landscape, understanding tax obligations is crucial for business success. As specialists in e-commerce taxation at Counto, we’ve developed this comprehensive guide to help online businesses navigate the complexities of tax deductions and compliance. 

Whether you’re selling products on social media, running a dropshipping operation, or offering digital services, this guide will equip you with the knowledge to optimise your tax position and avoid costly pitfalls. Let’s dive into the essentials of e-commerce taxation in Singapore and uncover strategies to keep more money in your business.

Understanding E-commerce Taxation in Singapore

Singapore operates on a territorial tax system. According to the Inland Revenue Authority of Singapore (IRAS):

1. All income from online and e-commerce businesses in Singapore must be reported for tax purposes.

2. This includes income from sales on e-commerce websites, social media platforms, drop shipping, affiliate marketing, advertising revenue, and digital products or services.

Key Compliance Requirements:

1. Declaration of Income

• Individuals, sole proprietors, or partners earning more than $6,000 in annual net business income must file a tax return.
• Those with additional online business income must declare it under the “Trade, Business, Profession or Vocation” section in their individual income tax return.
• Private Limited (Pte Ltd) companies must file annual returns with ACRA and submit Form C-S or Form C to IRAS, regardless of profit or loss.

2. Corporate Tax Filing for Pte Ltd Companies

• File Estimated Chargeable Income (ECI) within 3 months from the financial year end.
• Submit Form C-S or Form C and tax computation by November 30 annually.
• Pay any tax due within one month from the date of the Notice of Assessment.

3. GST Registration

• Monitor your 12-month taxable turnover on a calendar year basis.
• If it exceeds $1 million, apply for GST registration within 30 days.

⚠️ Failure to register can result in penalties of 10% of GST due and fines up to $10,000.

3. Record Keeping

• Maintain full and complete records of income and expenses for at least five years.
• This includes invoices, receipts, bank statements, and other documentary evidence.
• Consider adopting IRAS-compliant accounting software to assist with tax obligations. Alternatively, outsource to a professional accounting service like Counto to ensure accurate record-keeping and compliance.

Tax Deductible Expenses for E-commerce Businesses

1. Digital Infrastructure Costs

• Website development and maintenance
• Domain registration and hosting fees
• E-commerce platform subscriptions
• Internet subscription fees

2. Marketing and Advertising Expenses

• Digital marketing campaigns
• Content creation costs
• Affiliate marketing expenses

3. Cost of Goods Sold (COGS)

• Inventory costs
• Shipping and postage costs

4. Software and Tools

• Accounting software
• Inventory management tools

5. Professional Services

• Accounting and bookkeeping fees
• Legal services related to e-commerce operations

📍 Important: Only expenses that are “wholly and exclusively incurred in the production of income” are tax-deductible. Private expenses, such as personal travel or private car expenses, cannot be claimed even if partially used for business.

✅ Counto’s all-inclusive accounting plans for online sellers feature multicurrency support, unlimited transactions, GST submissions, and tax filing—with no hidden fees. Benefit from a dedicated team of experts, including a bookkeeper, Chartered Accountant, and tax specialist. Optimise your e-commerce finances today.

Navigating Complex Areas

Home Office Expenses If you’re operating from home, you may be able to deduct a portion of:

• Rent or property tax
• Utilities and internet costs
• Home office equipment

Maintain detailed records of home office usage to substantiate claims.

Cross-Border Transactions For international sales, consider:

• Tax implications of selling to overseas customers
• Potential double taxation issues
• Impact of currency exchange on tax calculations

Leveraging Tax Incentives

Online sellers in Singapore can benefit from several tax incentives designed to support growth and internationalisation:

1. Start-up Tax Exemption Scheme (SUTE)

The SUTE is particularly beneficial for new e-commerce ventures. Here’s what you need to know:

• Eligibility: New companies incorporated in Singapore, including those in e-commerce.
• Benefits: For the first three Years of Assessment (YAs): 75% exemption on the first $100,000 of normal chargeable income; 50% exemption on the next $100,000 of normal chargeable income.
• Conditions: The company must be incorporated in Singapore and have no more than 20 shareholders.

This scheme can significantly reduce the tax burden for new e-commerce startups, allowing them to reinvest more into their growth.

2. Double Tax Deduction for Internationalisation (DTDi)

For e-commerce businesses looking to expand internationally, the DTDi scheme offers substantial benefits:

• Eligible Expenses: Costs related to overseas expansion, including: Market preparation and feasibility studies, overseas marketing and promotion, and overseas business development.
• Benefits: Up to 200% tax deduction on qualifying expenses
• Application: Automatic for expenses up to $150,000 per YA. Higher amounts require approval from Enterprise Singapore or Singapore Tourism Board.

This scheme is particularly valuable for online sellers targeting overseas markets, as it can significantly offset the costs of international expansion.

Compliance and Best Practices

1. Maintain detailed records of all transactions and expenses for at least five years.
2. Monitor your annual taxable turnover closely for GST registration requirements.
3. Conduct regular financial reviews to ensure compliance and identify tax-saving opportunities.
4. Use IRAS’ GST Registration Calculator to determine if you’re liable for GST registration.

Summary

Navigating e-commerce taxation in Singapore requires a thorough understanding of both digital commerce and local tax regulations. IRAS actively conducts audits on online businesses, recovering significant amounts in taxes and penalties from non-compliant operators.

Experience the Counto advantage

Counto is the trusted provider of accounting, tax preparation and CFO services for online sellers and SMEs. Get accounting plans that combine bookkeeping with corporate tax filing to help you stay compliant at an affordable price. To learn more, speak to us directly on our chatbot, email us at [email protected], or contact us using this form.

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