A Step-by-Step Guide for Companies Navigating the Financial Year-End Process
Singapore Corporate Services Pte Ltd
Singapore CPA firm providing bookkeeping and accounting, company & personal income tax and company secretarial services.
A financial year-end, also known as a fiscal year-end, is the completion of a 12-month accounting period for an organisation. It marks the end of the financial reporting period, during which a company or entity assesses its financial performance and prepares financial statements.
The financial year-end does not necessarily coincide with the calendar year-end (January 1 to December 31). Many organisations choose different dates as their financial year end based on business requirements or legal regulations. For example, some companies may follow a financial year end that aligns with the calendar year, while others may have a different date such as the end of March, June, September, or any other month. Companies in Singapore can choose their financial year-end date based on factors such as business cycles, industry norms, and administrative convenience. This date determines when your company's tax filing obligations arise. If you don’t recall what your financial year-end date is, you can always check with your corporate service provider or look at your ACRA details.
During the financial year-end, businesses undertake various activities to close their books and compile accurate financial statements. These activities typically include:
Financial Statement Preparation
Financial statements such as the income statement, balance sheet, and cash flow statement provide a snapshot of the organisation's financial health, performance, and cash flow during the specified period. These statements will be useful in assessing your accounts, tax filing and auditing, so they are important to get right. Even if your company is not required to file your financial statements, you are not exempt from preparing them. It is always a good practice to prepare your financial statements and record them.
For companies that utilise a robust accounting system whereby transactions are either automatically or routinely recorded, and the system allows accountants to export these documents directly, then preparing financial statements is a fuss-free experience. Otherwise, they may have to manually calculate categorise and prepare these documents. When it comes to migrating from manual accounting practices to an online accounting system or from one system to another, you may engage us to make your next financial statement preparation a breeze.
When it comes to filing requirements, not all companies have to include financial statements in their tax submissions. Entities that do not have to file financial statements with ACRA:
Account Reconciliation
Reconciles various accounts to ensure that the records accurately reflect the financial transactions and balances. This process involves comparing the information in the general ledger with supporting documents and external statements.
Audit and Review
Not all companies in Singapore need to be audited. In Singapore, the requirement for a company to undergo an audit depends on its size, nature, and other factors. Here are the key types of companies and their audit requirements:
Requires Audit
May not require
2. Dormant Companies: Companies that have been dormant since their formation or the end of the previous financial year, and whose total assets do not exceed SGD 500,000, can opt for audit exemption.
3. Exempt Private Companies (EPC): An exempt private company in Singapore can choose not to have a statutory audit if it meets certain criteria:
It is important to note that even if a company is exempt from statutory audit, it is still required to prepare unaudited financial statements that comply with Singapore Financial Reporting Standards (SFRS) and file them with the authorities. To correctly identify your requirements, you may contact us to advise on the specific audit requirements applicable to your company based on its circumstances and ensure compliance with the relevant regulations.
Here’s how companies can prepare before engaging with an auditor for a smooth experience:
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By focusing on these areas, a company can better prepare for the audit process, facilitate a thorough review by the auditor, and ensure compliance with relevant regulations and standards.
Tax Reporting
The Inland Revenue Authority of Singapore (IRAS) mandates the filing of corporate income tax for the following types of entities:
It is important to note that sole proprietorships or partnerships are not classified as companies. The tax obligations for sole proprietorships or partnerships are addressed through individual income tax rates. To ensure compliance, companies falling under the aforementioned categories must file their corporate income tax returns in accordance with the requirements set by the IRAS.
Filing Estimated Chargeable Income (ECI) with IRAS
ECI is a requirement in Singapore for companies to estimate their chargeable income and report it to the Inland Revenue Authority of Singapore (IRAS) within three months from the end of their financial year. The purpose of filing ECI is to provide IRAS with an early estimate of the company's taxable income. This allows the IRAS to perform an initial tax assessment and issue a Notice of Assessment (NOA) based on the estimated chargeable income. The ECI helps the IRAS to monitor and ensure compliance with tax obligations.
Calculating ECI
When filing the Estimated Chargeable Income (ECI) in Singapore, the Inland Revenue Authority of Singapore (IRAS) typically requires the following broad categories of details. Before calculating your ECI on the IRAS portal, you should have this information available:
Company Information
Revenue Information
Deductible Expenses
Adjustments and Addbacks
Capital Allowances and Tax Incentives
It's important to note that the specific details and forms required for ECI filing may vary based on the company's circumstances and the requirements of the IRAS. It's advisable to refer to the official guidance and forms provided by the IRAS or consult with a tax professional for accurate and up-to-date information relevant to your company's ECI filing.
In addition to filing the Estimated Chargeable Income (ECI), there are several other key requirements and documents needed for tax filing in Singapore. These include:
For these matters, it would be convenient for most companies to engage an experienced tax professional service to prepare these documents on their behalf.
Have a smooth Financial year-end preparation process
By maintaining accurate financial records, preparing and filing the necessary documents, and engaging in strategic tax planning, your company can successfully navigate the year-end process and set the stage for continued growth and success.