The taxation of a sole trader in Singapore applies to the income derived from the business, trade, or professional activities undertaken by the self-employed individual. Those who work as sole traders in Singapore must calculate and include their income, according to their business activity, in their tax return. Our accountants in Singapore can help with the tax calculation, which can be especially important for those freelancers and sole traders who are in their first year of business.
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What is the income considered for taxation for sole traders in Singapore?
Any income obtained as a result of performing activities related to freelance services, counseling, or other professional activities undertaken by a single individual, or a sole trader, is subject to the income tax.
Because the sole trader is not a separate legal entity from its founder, a special tax return filing method is in place: the income from the business is reported separately from the personal income. Singapore does not impose a capital gains tax.
All self-employed individuals in Singapore must report the income they derive after conducting their specific activities in the city-state. This is not the same as the salary.
What are the tax rates applicable to sole traders in Singapore?
Self-employed individuals are subject to the personal income tax applied at the following progressive rates:
- 0% on the first SGD 20,000, while the next SGD 10,000 is subject to a 2% rate, or SGD 200;
- SGD 200 on the first SGD 30,000, while the next SGD 10,000 is levied at a 3.5% rate;
- SGD 550 on the first SGD 40,000, while the following SGD 40,000 is imposed a 7% rate;
- SGD 3,350 on the first SGD 80,000, and 11.5% on the following SGD 40,000;
- SGD 7,950 on the first SGD 120,000, and 15% on the following SGD 40,000;
- SGD 13,950 on the first SGD 160,000, and 18% on the next SGD 40,000;
- SGD 21,150 on the first SGD 200,000, and 19% on the following SGD 40,000;
- SGD 28,750 on the first SGD 240,000, and 19.5% on the next SGD 40,000;
- SGD 36,550 on the first SGD 280,000, and 20% on the next SGD 40,000;
- SGD 44,550 on the first SGD 320,000, and 22% on the next SGD 180,000;
- SGD 84,150 on the first SGD 500,000 and 23% on the following SGD 500,000;
- SGD 199,150 on the first SGD 1 million, and 24% from this amount onward.
It is important to note that these levies are available for Singapore resident sole traders.
What are the tax filing requirements applicable to sole traders in Singapore?
Sole traders in Singapore are required to keep updated and accurate records and accounts of all of their business transactions, as soon as they set up their sole trader.
The business income is declared for a twelve-month period, which includes both profits and losses. One of our accountants in Singapore can help you establish this period as soon as you start your freelance business. Tax filing is performed with the Inland Revenue Authority of Singapore.
Sole traders in Singapore who satisfy the existing criteria may claim deductions. These may be made for usual business expenses, medical expenses, capital allowances, and others. One of our agents who specializes in accounting in Singapore can help you with detailed information on the special tax deductions.
What is the accounting period for a Singapore sole trader?
The accounting period for a sole trader is the same as a business – 12 months. However, you should note that you must select the period right after registering as a sole entrepreneur. Following that, you must compute and report your profits and losses to the IRAS for the respective period.
According to the IRAS, most businesses, sole traders included, choose the 1st of January to 31st of December as an accounting period.
What are the accounting documents that a sole trader must draft?
The accounting papers for a sole trader are simple to prepare and include:
- the Profit and Loss Account;
- the Balance Sheet.
Based on the information on these documents, you will then have to take out the data and fill out the 2 or 4-line Income Tax Return, which will be submitted with the IRAS.
The 2-line return will comprise the revenue and adjusted profits/losses. The 4-line return will offer information on the revenue, the gross profit, the allowable business expenses, and the adjusted profits/losses, in this order. Following that, the Income Tax Return (Form B or B1) must be submitted between January and the 15th of March.
Are non-resident sole traders taxed differently in Singapore?
Yes, non-residents are taxed slightly differently in Singapore. They can be imposed a flat rate of 15% on their Singapore-derived income, or they can be applied the same progressive taxation. The system is the one that leads to a higher amount to be paid.
You can contact our accounting firm in Singapore for complete accounting services and tax consultancy for self-employed individuals and freelancers.