The sole trader or self-employed individual enjoys the lightest taxation and reporting regime out of all the possible types of legal entities in Singapore. This simple business form may be suitable for some investors; however, they must be well aware of the liabilities that are implied.
The taxation of sole traders in Singapore is based on the income earned in the city-state and it is described by our team of accountants in Singapore.
The video below highlights the taxation principles in this case:
The tax obligations for self-employed individuals in Singapore
All sole traders in Singapore must report the income they derive from their specific business activity which they run in the city. The business income is not the salary.
The income derived from these types of self-employed activities in Singapore is taxed at the individual income tax rate and it is considered a part of the total personal income of that individual.
In Singapore, the personal income tax has progressive rates from 2 percent to 20 percent, however, starting with the ear of assessment 2017, the income derived by an individual will have a 22% taxation rate. All income other than that from employment derived by a non-resident will also be taxed at a flat 22 percent rate. An accountant in Singapore can help you understand the individual taxation system, especially if you have just become a self-employed individual.
The accounting period for self-employed individuals in Singapore
Sole traders in Singapore must declare their accounting period every year. This means that the business income is declared based on a specific 12 month period during which each self-employed individual calculates his or her profits and losses. Our accountants in Singapore recommend that you decide on this period during your first year of business. As an example, most self-employed individuals will choose an accounting period that ends on December 31st.
The experts at our accounting firm in Singapore can help you with more information about the taxation of the sole traders and can help you keep the proper, complete and accurate records and accounts.
Contact us for more details on the accounting practices in Singapore.