What is Estimated Chargeable Income (ECI)?
ECI is the estimated calculation of a company’s taxable income (after the tax allowable expenses are deducted and before deducting the exempt amount) for a Year of Assessment (YA).
Statement of revenue to be declared in ECI
In addition to declaring the ECI, the company is required to report their revenue when completing the ECI Form.
This statement of revenue becomes mandatory from January 2017. The revenue declared relates to the company’s primary income and it does not include the profit on disposing of plant and equipment. For instance, the investment holding company would report their income as the investment revenue (e.g. dividend and interest income).
If audited financial statements are not available, the company can use their management accounts to declare the revenue.
Mandatory e-Filing of ECI
The mandatory e-filling of CIT Returns (such as Form C-S, Form C and ECI) will be mandatory in a staged approach starting from YA 2018 to YA 2020.
The change in filing was announced in the Budget 2016 to comply with the Government's objective to increase cost-effectiveness in delivering public services. This also takes into account the Smart Nation vision that aims to use technology in an attempt to enhance productivity.
The phased approach has been used to make it easier for small companies to ease into e-filing and modify their processes.
Update in Corporate Income Tax (CIT) Rebate
The Minister for Finance declared the cap for the CIT rebate at Budget 2017 to increase from S$20,000 to S$25,000. The percentage of rebate stays at the same rate of 50% of the corporate tax payable. Additionally, the CIT rebate will continue at a reduced rate for YA 2018, subject to a limit of S$10,000.
A company is not required to include the CIT Rebate when completing the ECI for YA 2017 and YA 2018 as IRAS will automatically take this into account.
IRAS has begun to modify a company’s tax assessment for YA 2017 and YA 2018 ECI that have already filed and issue Notice of Assessment (NOA) to calculate the change in CIT rebate. Any companies affected by these changes are expected to receive an updated NOA and an appropriate refund for the extra tax paid up to 30 April 2017.
For the company that is not required to pay tax on ECI by instalments, an adjusted instalment plan will be sent to the company with the updated NOA.
What are the ECI filing options?
ECI has a choice of two filing options. With e-Filing becoming mandatory from YA 2018, companies are encouraged to adopt this e-process as soon as possible.
When to file ECI?
Every company has to file their ECI within a period of 3 months from the end of the financial year.
However, this does not apply to companies that are not specifically required to file or those that qualify for the administrative concession.
A company will get a reminder from the IRAS to return the completed ECI at the end of the financial year. Companies should plan to automatically file their ECI within three months of the financial year end even if the company does not receive the official reminder.
Benefits of e-Filing ECI
Any company that adopts e-Filing for their ECI can enjoy:
1. Greater payment flexibility with a higher number of instalments to pay the estimated tax; and
2. Instant confirmation after submitting a successful e-File
The instalment payment option is only open to companies that have an existing GIRO arrangement. Any company that does not yet qualify for GIRO for Corporate Tax are recommended to apply for the necessary arrangement at least two weeks before planning to e-file their ECI.
In the event the GIRO arrangement is not organised by the time the payment is due, a company will not be in a position to make the instalment payments and must pay the entire lump sum of the estimated tax by the due date of payment.
Once the ECI form is processed by the IRAS, a NOA is issued to the company which states the exact amount of tax payable.
NOA will not be issued if the company files a "Nil" ECI. Upon receiving the NOA, the company must pay the tax due within one month unless a GIRO instalment arrangement is in place.
The NOA states the applicable payment methods. All Singapore incorporated companies have the option to apply for the GIRO instalment plan.
Benefits of filing ECI on time
1. Option to pay taxes by instalments
Any company that files the ECI on time has the option to pay their corporate tax bill by instalments. The early filing is encouraged with an incentive of having a higher number of instalments granted.
2. Greater instalments for e-filing
Any company that files the ECI on time and completes by e-File (rather than the paper method) also has the option of a higher number of instalments.
If the chargeable income declared in Form C-S or Form C is below the ECI, any tax paid above the required amount is automatically refunded.
However, if the income noted in Form C-S or Form C is higher than the ECI, the outstanding tax balance should be paid within one month period.
In situations where there is a major difference in the ECI and the chargeable income declared in the Form C-S or Form C, IRAS may request a reason for this difference.
Waiver of requirement to file ECI
The IRAS has attempted to minimise costs to businesses by improving the tax-filing system by revising the rules related for ECI waiver.
1. There is no need to file ECI for the financial year ending before June 2017 if the total revenue for the year is less than S$1 million and the ECI* is nil for the YA.
2. There is no need to file ECI for the financial year ending after July 2017 if the total revenue is less than S$5 million and the ECI* is nil for the YA.
* ECI is calculated after deducting the tax allowable expenses and before deducting the exempt amount.
It is the company’s responsibility to establish whether or not they meet the needs of the waiver of the requirement.
Any company that meets the above criteria is not required to file the ECI for the relevant year and there is no requirements to inform IRAS.
For companies that do not meet the relevant criteria, it is necessary to file the ECI for the financial year.
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