The Estimated Chargeable Income (ECI) is an estimate of the company’s taxable income for a certain Year of Assessment (YA). The taxable income is after deducting tax-allowable expenses. In simple terms, it is the total revenue less allowable expenses which is the taxable profit of the company. Due to the tax filing season for companies, a company may close its financial year for a very significant period before filing its corporate taxes with the Inland Revenue Authority of Singapore (IRAS). The ECI however, has to be submitted to IRAS within 3 months after the end of the financial year.
Companies that fulfil the following criteria are exempted from filing their ECI:
For financial years that ended in or before June 2019:
– Annual revenue is not more than SGD$1 million for the financial year; and
– ECI is zero for the Year of Assessment
For financial years that ended in or after July 2019:
– Annual revenue is not more than SGD$5 million for the financial year; and
– ECI is zero for the Year of Assessment
Besides stating the ECI, the company will have to declare its revenue in the ECI form. This declaration is compulsory with effect from 2017. If the audited accounts are not ready, the company may use its management accounts to calculate its revenue. Should the revenue amount based on audited financial statements be different from that declared in the ECI Form, and there is no change in your ECI, you are not required to revise the revenue figure. Revenue refers to a company’s main source of income and excludes items like gain on disposal of fixed assets. If your company is an investment holding company, your main source of income will be your investment income (e.g. interest and dividend income).
Advantages of filing ECI on time
One of the advantages of filing the ECI on time is that companies that submit their ECI within the qualifying period may opt to pay corporate taxes by instalments. To encourage early filing, the earlier a company files, the greater the number of instalments they will be given.
What is the reported ECI is different from the final figures in the corporate tax filing?
If the chargeable income reported in Form C-S/ C is less than the chargeable income estimated in ECI, the excess tax paid earlier will be refunded automatically.
If the chargeable income reported in Form C-S/ C is more than the chargeable income estimated in ECI, the additional tax must be paid within one month from the date of the Notice of Assessment. Please note that if there is a significant difference between the ECI reported earlier and the chargeable income reported in the Form C-S/ C subsequently, IRAS may require the company to provide an explanation.
What will happen if a company fails to file its ECI?
If a company has failed to file its ECI, IRAS shall issue a Notice of Assessment (NOA) based on its estimation of its income. The company will have one month from the date of the NOA to submit a written objection if it does not agree with IRAS’ estimated assessment. If no objection is filed then the NOA is recognised as final.
If you are looking for advice or assistance on your company’s ECI, do contact us via email at [email protected]
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
Yours Sincerely,
The editorial team at Acra Filing Agent
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