For small business owners and entrepreneurs in Singapore, understanding how to calculate your Estimated Chargeable Income (ECI) is crucial for accurate tax reporting and compliance.
The ECI is an estimate of a company’s taxable income for a given Year of Assessment (YA) and must be filed with the Inland Revenue Authority of Singapore (IRAS) within three months from the end of your financial year. Here’s a comprehensive guide to help you through the process:
This date marks the conclusion of your financial period and is crucial for aligning your tax reporting with IRAS requirements. For example, if your financial year ends on December 31, your ECI must be filed by March 31 of the following year.
These documents provide a comprehensive overview of your company’s financial performance and position, which are essential for calculating your ECI.
Start with your company’s net profit before tax as shown in your Profit and Loss Statement. This figure is the baseline from which you will make further adjustments to arrive at your ECI.
✅ Tired of surprise fees from accounting services? We prioritise your savings and efficiency. From multicurrency accounting to tax filing, Counto handles it all—with unlimited transactions. Explore our transparent, all-in-one pricing here.
Subtract any income that is not taxable. Non-taxable income may include:
These may include:
Deduct capital allowances for qualifying capital expenditures. Capital allowances are given instead of depreciation and can be claimed on fixed assets such as machinery, office equipment, and vehicles. Ensure that you apply the correct rates and follow IRAS guidelines.
If your company has incurred losses in previous years, you may be able to carry forward these losses to offset against your current year’s ECI. Ensure that you meet the continuity of ownership test and the same business test as required by IRAS.
Deduct any donations made to Institutions of a Public Character (IPCs). Approved donations qualify for a 250% tax deduction, which can significantly reduce your taxable income.
Consider applicable tax exemptions and rebates, such as:
After making all the necessary adjustments, you will arrive at your Estimated Chargeable Income (ECI). This is the figure you will report to IRAS.
Your ECI should be submitted within three months from the end of your financial year. This can be done electronically through the myTax Portal.
Remember, while ECI is an estimate, it should be as accurate as possible. Significant underestimation can lead to penalties, while overestimation ties up your company’s cash flow unnecessarily. For complex situations or if you’re unsure about any aspect of the calculation, it’s advisable to consult with a professional accountant or tax advisor.
Calculating your ECI accurately is vital for compliance with Singapore’s tax regulations and for avoiding penalties. By following these steps and maintaining thorough financial records, you can ensure a smooth and accurate ECI filing process.
Counto is the trusted provider of accounting, tax preparation and CFO services for startups 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.
Here are some articles you might find helpful:
Whatsapp 
Call