FAQ

Larger companies are required to have audits by law, but many would do so even if there were no statutory obligations. An independent audit is crucial to good corporate governance and essential to an effective internal financial control function.

More importantly, an audit adds credibility to information provided to stakeholders. It assures investors and other providers of finance who can make their decisions in a safe environment, with confidence. Safety and confidence reduce the cost of capital which make companies more competitive and more profitable.

Other purposes for companies to have audits include:

• Satisfy stakeholders such as investors, employees, customers and suppliers as to the credibility of published information
• Facilitate computation of corporate tax, goods and services tax, and other taxes accurately and payment on time, thereby avoiding queries and possible investigations and penalties
• Enable companies to comply with banking covenants
• Help deter and detect material frauds and errors
• Facilitate the purchase and sale of businesses
• Take advantage of the spin-off benefits such as advice on the structure, internal control and operations of systems
• Demonstrate good corporate governance

Under the Singapore Companies Act, all companies must get their financial statements and accounting records audited by an auditor on an annual basis, unless the company meets the Singapore audit exemption requirement.

A company is exempted from having its accounts audited if it is considered as a small company.

A company is exempted from having its accounts audited if it is considered as a small company.

To qualify for the small company status, the company has to firstly be a private limited company. Secondly, it has to satisfy any 2 of the 3 audit exemption criteria:

• Total annual revenue ≤ SGD $10 million
• Total assets ≤ SGD $10 million
• Total number of employees ≤ 50

Nonetheless, all companies are required to maintain proper accounting records and prepare “true and fair” financial statements that comply with the requirement of Financial Reporting Standards (FRS) that are prescribed by the Council on Corporate Disclosure and Governance (CCDG).

Under the Singapore Companies Act, all companies, with the exemption of small companies in Singapore need to be audited annually.

However, you may wish to note that audit fees are generally lower for companies with fewer transactions.

Audits add value to the company. Smaller companies invest in audits for the same reasons as larger companies, and specific issues make smaller companies invest in an audit worthwhile:

• The cost of the audit is often marginal for small companies, particularly where the auditor is involved in the preparation of the statutory accounts.
• Small companies who prepare their accounts often need help in arriving at adjustments, such as those for obsolete stocks, bad debts and other provisions.
• Small companies may find themselves subject to a statutory audit requirement when their business grows. The first year and the subsequent years of an audit can induce enormous effort if the accounts are not prepared in good order.
• An audit is essential in financing negotiations, take-over and buy-out.
• The close involvement of the auditor provides companies with comfort when faced with tax and regulatory investigations.

Smaller companies may believe, for example, that because there is no longer any statutory audit requirement, there will no longer be any external checking of their books and records. However, the power and resources of the Inland Revenue Authority of Singapore and the Department of Customs and Excise are not to be undermined since they are ever-evolving. This means that there are likely to be more investigations in the future and that the checking will be more thorough and detailed.

Audit fees are not regulated by the Public Accountants Board and there is no scale reference for auditors. Auditors generally charge fees according to time spent on the audit assignment. Fees also reflect the level of skill and experience required and the level of responsibility and complexity involved in the audit work. Alternatively, fees are also charged on an agreed amount between the auditor and the client.

ECI is Estimated Chargeable Income. It is an estimate of a company’s chargeable income for a year. Under the Income Tax Act, all companies, regardless of whether they are making profits or making losses, are required to submit their ECI within three months from their Financial Year End. We, as your tax agent, will help you submit your ECI through e-filing.

If you fail to submit the ECI within the stipulated time, IRAS may raise an estimated tax amount at their discretion.

Under the Income Tax Act, all companies are required to submit their Income Tax Return (Form C) together with audited accounts / unaudited accounts (for companies qualifying for an audit exemption under Companies Act) and tax computation with supporting schedules by 30th November of the following year, regardless of when their accounting period ends.

For example, if the company’s Year-End is 31^st January 2020, the deadline is 30^th November 2021. If the Year-End is 31^st December 2020, the deadline is also 30th November 2021. There is no extension applicable and a penalty on late submission will be charged.

The current Corporate Tax rate is 17%. This applies to both local and foreign companies.

With effect from Y/A 2020, the following tax exemptions are given to companies on normal chargeable income of up to $200,000:

Partial tax exemption scheme for companies (For YA 2020)

First $10,000 @ 75% = $7,500
Next $190,000 @ 50% = $95,000
Total $200,000 = $102,500 (tax exemptions)

Tax exemption scheme for new start-up companies (where any of the first 3 YAs fall in, or after YA 2020)

First $100,000 @ 75% = $75,000
Next $100,000 @ 50% = $50,000
Total $200,000 = $125,000 (tax exemptions)
For YA 2020, Companies will be granted a 25% Corporate Income Tax Rebate capped at $15,000.

Companies don’t need to factor in the Corporate Income Tax Rebate when filing the ECI and the Income Tax Return (Form C-S / C) as IRAS will compute it and allow the Rebate automatically.

Corporate Income Tax rebates are applicable for the Years of Assessment (YAs) 2013 to 2020.

The rebates also apply to income derived by Registered Business Trusts, non-resident companies that are not subject to a final withholding tax and companies that receive income taxed at a concessionary tax rate. They do not apply to income derived by a non-resident company that is subject to final witholding tax.

Your company’s chargeable income declared in its Corporate Income Tax Returns (Estimated Chargeable Income (ECI) and Form C-S/ Form C-S (Lite)/ Form C) should not include the rebate as IRAS will compute and allow it automatically.

Rebate Percentages & Caps

The rebates are computed on the tax payable after deducting tax set-offs

With effect from Y/A 2020, the following tax exemptions are given to companies on normal chargeable income of up to $200,000:

Partial tax exemption scheme for companies (YA 2020 onwards)

First $10,000 @ 75% = $7,500
Next $190,000 @ 50% = $95,000
Total $200,000 = $102,500 (tax exemptions)

Tax exemption scheme for new start-up companies (where any of the first 3 consecutive YAs fall in, or after YA 2020)

First $100,000 @ 75% = $75,000
Next $100,000 @ 50% = $50,000
Total $200,000 = $125,000 (tax exemptions)

Taxpayers are given one month from the date of the Notice of Assessment (NOA) to pay the tax.

A 5% late payment penalty will be imposed by IRAS on unpaid tax if full payment is not received by the due date of the NOA.

If the tax remains unpaid 60 days after the imposition of the 5% late payment penalty, an additional penalty of 1% per month may be imposed for every completed month that the tax remains unpaid, up to a maximum of 12% of the unpaid tax.

Within 3 months from Date of Incorporation

Within 3 months from financial year-end

By 15th April / Current Year

By 31^st July, unless the ECI had been submitted within 3 months after the end of its accounting period which will then give the company an extension until December.

By 30^th November the following year

Within 6 months from Date of Incorporation

Within 18 months from Date of Incorporation

Held every year and not more than 15 months from the last AGM

Within 1 month from the AGM date

Not more than 6 months from financial year-end