How To File Estimated Chargeable Income (ECI): A Guide For Singapore Businesses

For Singapore businesses, filing an Estimate Chargeable Income (ECI) is more than just a mundane administrative task. This obligation is in fact an opportunity to demonstrate your commitment to transparency, accountability, and strategic tax planning.

Whether you are at the inception of a promising startup or an established company, this guide will provide you with a comprehensive understanding of the ECI. So, seize this opportunity and let’s begin!

What is the definition of Estimated Chargeable Income?

The Estimated Chargeable Income (ECI) represents an estimate of your company’s taxable profits for a specific Year of Assessment (YA). It is the amount after deducting tax-allowable expenses from the projected taxable income for the financial year.

Businesses operating in Singapore are typically required to file an ECI at the end of each fiscal year. By doing this, you are helping the Inland Revenue Authority of Singapore (IRAS) assess and monitor your company’s tax obligations more effectively.

When calculating the ECI, only the primary income of your company is counted. This procedure encompasses solely the revenue generated from core business activities (e.g. sales of goods or services).

Other sources, such as gains from the sale of company property, rental income, shares, or dividends received from investments, are generally not included.

Which companies must file the ECI?

All businesses operating in Singapore shall file Estimated Chargeable Income unless your company meets one of the specific ECI filing exemptions as follows:

(1) Your company qualifies for both conditions of the ECI filing waiver:

• The annual revenue is no more than SGD 5 million or below for the financial year; and
• ECI is nil (no taxable income incurred) for the YA. The ECI should be the amount before deducting the exempt amount under the partial tax exemption scheme or the tax exemption scheme for start-ups.

(2) Your company structure is specifically not required to file ECI (e.g. foreign ship owners, foreign universities, designated unit trusts, approved CPF unit trusts, etc.)

You do not need to inform the IRAS in these situations separately. They have mechanisms in place to automatically identify and take note of exempt companies.

To gain a deeper understanding of the restrictions and exclusions related to filing your ECI, you should also visit the IRAS website.

How can you file the ECI?

As the Year of Assessment draws to a close, it’s time for your Singapore business to start the process of filing its Estimated Chargeable Income (ECI).

You can follow the 3 steps below:

Step 1: Ensure that you are authorized as an “Approver”

Either you or the representative has to be given authorization from the company to be eligible for filing your company’s ECI.

After approval, the person will be designated “Approver” for Corporate Tax (Filing and Applications) in CorpPass. Only the “Approver” can file the ECI with IRAS.

Step 2: Get the necessary documentation

When preparing the documents for completing the Estimated Chargeable Income (ECI) forms, make sure you have the following:

• Your Singpass
• Your company’s Unique Entity Number (UEN)
• Your CorpPass login details
• Necessary accounting records (e.g. financial statements, revenue and expense details, supporting documents, and any other relevant financial information needed)

It’s important to note that you must maintain proper record-keeping practices and ensure the accuracy of the information provided for the financial year.

Step 3: File your ECI through the myTax portal

What will you do next after the documents are ready?

It’s time to log into the IRAS portal to start filing your company’s ECI.

In order to ease the complexity, the government also provides digital guides on their official site to help companies and tax agents navigate the procedures better.

The two guidelines differ for companies and tax agents. Therefore, you should carefully read and follow the relevant guide that corresponds to your specific situation.

The ECI filing deadline is within 3 months from the end of each assessment year.

After filing, you can now await the Notice of Assessment (NOA) from the IRAS to pay the corresponding estimated tax.

How do you pay the estimated tax following the ECI filing?

Once receiving the Notice of Assessment from the IRAS, you shall proceed with paying the assessed tax amount. Please refer to the two available methods below.

Payment by GIRO

To facilitate a more manageable payment process, Singapore-registered companies are encouraged to sign up for the GIRO (General Interbank Recurring Order) payment scheme.

The GIRO system allows individuals and businesses to authorize financial institutions to deduct funds directly from their bank accounts for various payment purposes, including tax payments.

In case your company does not currently have a GIRO arrangement for Corporate Income Tax, remember to apply at least 3 weeks before filing the ECI.

The application must be approved before the payment due date, which is typically one month from the date of the NOA, for paying in instalments.

Electronic Payment

You can use Internet Banking services provided by participating banks to transfer the tax amount directly from your bank account to the IRAS.

Additionally, e-Payment services such as Phone Banking and NETS (Network for Electronic Transfers) are also common among businesses operating in Singapore.

Both methods offer convenient and efficient ways to pay your taxes. Electronic payment allows you to make one-time payments or schedule recurring payments, while GIRO provides a seamless and automated payment process.

Why should your business file the ECI as early as possible?

While ECI filing is mandatory for many companies, there is an additional incentive to file early, especially if your business expects to pay taxes in instalments.

Particularly, IRAS offers an instalment payment scheme for ECIs that are filed early. Rather than paying in one lump sum, you can spread the payments over a few months. The earlier your company files the ECI, the greater the number of instalments it can enjoy.

If the Tax Payable on the 1st ECI is filed electronically by the 26th of each qualifying month, within:

• 1 month from the financial year end, you can pay the tax in 10 instalments
• 2 months from the financial year end, you can pay the tax in 8 instalments
• 3 months from the financial year end, you can pay the tax in 6 instalments
• After 3 months from the financial year end: 0 instalment is allowed.

Please note that instalment payments can only be made via GIRO.

For companies that file the ECI timely, IRAS will issue a Notice of Assessment (NOA) Type 1. Following this document, you shall pay your tax in instalments per legal regulations.

What happens if your ECI filing is late or disqualified?

Contrary to the situation above, if you fail to submit the ECI on time, a Notice of Assessment (NOA) Type 2 will be issued.

If your company disagrees with the estimated tax assessment, you can file an objection within two months of receiving the Notice of Assessment. In your objection, you must explain why you filed late or didn’t file the ECI and give the revised amount of the ECI.

No matter how the objection turns out, your company will have to pay the full amount stated in the Notice of Assessment no later than 1 month after this notice issuance.

However, if the objection is reviewed and successful, resulting in an excess amount being paid, the IRAS will refund the surplus to your company.

Therefore, you should be aware of the risks and take the necessary steps to prepare for the ECI filing process.

To wrap up

In conclusion, filing the Estimated Chargeable Income (ECI) is an essential responsibility for most Singapore businesses. This process ensures tax compliance, helps avoid penalties, provides financial clarity, and opens doors to potential Singapore’s tax benefits.

By seeking the counsel of tax professionals or reaching out to experts at the IRAS, you can pave the way for the accurate and punctual filing of your ECI.

Still have questions about filing obligations in Singapore? We are ready to offer help. Feel free to get in touch with us via service@bbcincorp.com for more support on taxation and doing business in Singapore in general!

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