The estimated chargeable income (ECI) covered in this article is applicable to companies only. Since 2020, it has become compulsory for all companies to e-file ECI, including new companies.
However, several exceptions apply. This article touches on when ECI filing is not needed, and answers all the questions related to this corporate tax compliance requirement imposed by the Inland Revenue Authority of Singapore (IRAS).
What is ECI filing?
The definition of estimated chargeable income (ECI) according to IRAS is ‘an estimate of the company’s taxable income (after deducting tax-allowable expenses) for a Year of Assessment (YA)’.
ECI has to be filed or submitted to IRAS every year. The estimate should be the amount before deduction of the exempt amount under the partial tax exemption scheme or the tax exemption scheme for new start-up companies.
Is ECI compulsory?
It is compulsory for all companies, including new companies, unless they belong to the categories not required to file.
Estimated chargeable income exemptions
ECI exemptions applies to the following categories:
- Foreign ship owners or charterers for whom the Shipping Return has been or will be submitted by the local shipping agent;
- Foreign universities;
- Designated unit trusts and approved CPF unit trusts
- Real estate investment trusts that have been granted the tax treatment under Section 43(2) of the Income Tax Act; and
- Any other specific case granted waiver to furnish ECI by IRAS, e.g. via an advance ruling issued.
For item 3, the unit trusts must be approved under Section 35(14) of the Income Tax Act, and for the purposes of any investment scheme under the Central Provident Fund Act respectively. The income listed under Sections 35(12) and 35(12A) of the Income Tax Act is not taxed at trustee level.
Other income of unit trusts by the Sections mentioned above are likely to be negligible, thus there is no need for these unit trusts to file ECI.
When not to file for ECI
Companies or entities are required to self-assess to see whether they meet the criteria for a waiver to file ECI. If an entity, even if it has business activities, falls in a category for exception to file as mentioned in the preceding section, it does not need to do so.
Entities which qualify for this waiver need not seek permission from IRAS and need not inform IRAS. They simply need to ignore the ‘Ready to File’ status on their myTaxPortal account.
Requirements for waiver to file ECI
A business entity which fulfills both criteria below is allowed a waiver to file:
- Annual revenue is not more than $5 million for the financial year; and
- ECI is ‘NIL’ for the Year of Assessment.
Revenue refers to a company’s main income source, excluding gains on disposal of property, plant and equipment.
For investment holding companies, the main source of income is investment income, including items such as dividend income and interest income.
If an audited financial statement is unavailable, revenue figures can be obtained from company management accounts.
If the revenue figure in an audited financial statement is different from the declared ECI amount, the company need not revise the revenue amount and the ECI remains the same.
What to file for ECI
When filing the estimated chargeable income, you will need to state the ECI in Form C-S or Form C. In addition, you must declare the revenue of the company.
What to do if amount declared as ECI is different from Chargeable Income reported in Form C-S/ C
If the chargeable income reported in Form C-S/ C is less than the chargeable income estimated in ECI, IRAS will automatically refund the excess tax paid earlier.
If the chargeable income reported in Form C-S/ C is more than the chargeable income estimated in ECI, the company must pay the additional tax within a month from the date of the Notice of Assessment.
If the difference is significant, IRAS may require the company to provide an explanation.
When to submit ECI
ECI must be filed within 3 months from the company’s end of financial year. For example:
|Financial Year End of Company||Financial Year / |
|YA||Filing Deadline for ECI|
|31 Mar of each year||1 Apr 2019 – 31 Mar 2020||2021||30 Jun 2020|
|31 Jul of each year||1 Aug 2019 – 31 Jul 2020||2021||31 Oct 2020|
|31 Dec of each year||1 Jan 2020 – 31 Dec 2020||2021||31 Mar 2021|
IRAS will send a notification to companies to file the ECI in the last month of the companies’ financial year. Even if they do not receive this notification, they should proceed to file the ECI within three months from their financial year end.
Advantages of filing ECI early
The earlier the ECI is e-filed, the more instalments will be allowed. For example:
- ECI filed 1 month from financial year end – 10 instalments for e-file
- ECI filed 2 months from financial year end – 8 instalments for e-file
- ECI filed 3 months from financial year end – 6 instalments for e-file
- ECI filed more than 3 months from financial year end – no instalments allowed
Qualifying companies must file the ECI by the 26th of every qualifying month to enjoy the maximum number of instalments.
According to Budget 2020, companies which are on GIRO and filed their ECI on time automatically qualify for two months extra of interest-free instalment, if the ECI is filed as follows:
- during the period from 19 Feb 2020 to 31 Dec 2020 (both dates inclusive); or
- before 19 Feb 2020 and the company has an ongoing instalment payment to be made in Mar 2020.
The minimum payable instalment amount via GIRO deduction is S$50. The first few instalments can be combined. It is important to note that IRAS may vary the instalment plan for companies which file revised ECIs.
How to file ECI
User Guides on e-filing ECI is available on the IRAS website for companies and for tax agents.
- For Company: User Guide – e-File Estimated Chargeable Income
- For Tax Agent: User Guide – e-File Estimated Chargeable Income
What happens after ECI has been filed?
After IRAS has processed it, a Notice of Assessment (NOA) will be sent to the company to indicate the total amount of tax that has to be paid by the company. The NOA can also be viewed at mytax.iras.gov.sg.
IRAS will also send information about the various ways to pay. However, no NOA will be issued if ‘Nil’ has been filed for the ECI amount.
When to pay ECI
The tax must be paid within one month from the date of the NOA unless payment is via instalment plan (GIRO).
How to pay for ECI
There are two ways to pay corporate taxes:
Signing up for GIRO is necessary for companies that wish to pay taxes by instalment. This must be done at least 3 weeks before e-filing ECI.
GIRO instalment plans are available for Singapore-registered companies. If the GIRO application is not approved before the payment due date, the company is not eligible for the instalment plan. The full amount of estimated tax must then be paid by the due date.
Companies can check their GIRO application status through the Corporate Tax Integrated Phone Service.
2. Other electronic modes
This constitutes payment via internet banking, phone banking, NETS, PayNow QR, DBS PayLah! Mobile App, AXS station, AXS e-station, SAM kiosk and SAM web or mobile.
How to calculate chargeable income (ECI)
Note that property developers should report their ECI based on the Completed Contracts Method. Below is a hypothetical example of an ECI calculation for YA2020.
Company’s Profit and Loss statement for the financial year 2019 (Year of Assessment 2020):
|Less: Cost of goods sold||$(35,000)|
|Other Income:- Rental Income||$1,200|
|Printing and Stationery||$(290)|
|Property Tax (rental property)||$(300)|
|Transport ($200 was incurred on car SJA 123)||$(780)|
|Water & Electricity||$(925)|
|Net Profit before Tax||$6,645|
[No capital allowance is to be given on private cars (S-plated cars), RU-plated cars and company cars (Q-plated or S-plated cars).]
The company also purchased a new private car (SJA 123), a desktop for $1,200 and a filing cabinet for $300 in YA 2020. There were no unutilised capital allowances brought forward from the previous YA.
Calculation of the company’s ECI would then be as follows:
|Net profit before Tax||$6,645|
|Less: Separate Source Income|
|Add: Disallowable Expenses|
|Property Tax (Rental Property)||$300|
|Transport (S-plated car)||$200|
|Adjusted profit before Capital Allowances||$6,245|
|Less: Capital Allowances for YA 2020|
|100% Write-Off for Low-Value Asset – Filing Cabinet||$(300)|
|100% Write-Off in One Year for Computer||$(1,200)|
|Adjusted profit after Capital Allowances||$4,745|
|Add: Separate Source Income|
|Rental income (net of Property Tax for rental income)||$900|
|Estimated Chargeable Income (before exempt amount)||$5,645|
The company in this example can report its revenue as S$80,000 and its ECI as S$5,645 under the 17% tax rate category.
A company that also qualifies for the Tax Exemption Scheme for New Start-Up Companies, must indicate it accordingly in the relevant box of the ECI return.
Deferment of CIT payments
Companies with corporate tax payments that are due from 1 Jul 2020 onwards will not be given any deferrals. They are required to settle their payment(s) by the respective stipulated due date(s) according to their financial year ends.
What if I forgot to file?
Companies are given a 3-month grace period to file the ECI. If they fail to do so after this period, IRAS will issue a NOA based on its own estimate of a company’s income.
If a company disagrees with the estimate given by IRAS, it must lodge an objection with IRAS within 1 month from the date of NOA electronically via the MyTaxPortal or by writing to the corporate tax division of IRAS.
How to amend ECI
There are two ways to submit a revised ECI.
This is done through the myTaxPortal. The Approver for corporate tax filing of a company can make the amendment under ‘Revise/Object to Assessment’ in the portal. Here are quick links to user guides provided by IRAS:
2. Writing in
Companies can write to IRAS to inform them of the revised ECI amount and the reasons for making the revision.
Typically your accountant will do this on your behalf after you give them your management accounts. Alternatively, you can engage Intime Accounting to assist you.
Our Corporate Tax division will be able to prepare draft tax computations based on your management accounts for the purpose of filing the Estimated Chargeable Income. Aside from that, we can offer a wide range of other corporate tax services.
Other relevant articles:
- 6 Reasons Companies Should Use Corporate Tax Services
- 2020 Guide on How to Reduce Corporate Tax in Singapore
- Tips for Corporate Tax Filing in YA2020
- Types of Taxes to be Aware of in Singapore
- What is Withholding Tax in Singapore?
- About Tax Residency of a Company in Singapore
- Tax Residency Certificate in Singapore – Why Apply and How
- Stamp Duty for Variable Capital Companies in Singapore
- What is a Tax Reclaim Form?
- How to Manage Tax for a Dormant Company