What is ECI and When to File ECI? Best Guide for Singapore SMEs

Incorporated companies in Singapore are mandated to file their Estimated Chargeable Income (ECI) within three months of the conclusion of their fiscal year. For instance, if a company’s financial year ends on December 31, 2019, it must file ECI by March 31, 2020. Understanding the significance of timely ECI filing is paramount, as it not only aids policymakers in assessing industry performance but also fulfils an essential corporate compliance requirement.

Why ECI Filing Matters

Filing ECI holds dual significance for businesses:

1. Macro-Level Insights: ECI data offers policymakers valuable insights into industry performance, enabling them to fine-tune policies to benefit specific sectors. By providing a snapshot of taxable income across various industries, ECI helps policymakers make informed decisions to bolster economic growth.
2. Mandatory Compliance: Timely ECI filing is a legal obligation for all companies in Singapore. Failure to adhere to filing deadlines prompts the Inland Revenue Authority of Singapore (IRAS) to issue a Notice of Assessment (NOA), estimating the company’s total revenue. Companies disagreeing with the assessed tax figure can submit a Notice of Objection, underscoring the importance of accurate and punctual ECI submissions.

Understanding ECI in Depth

ECI represents a company’s estimated taxable profit for a specific valuation year. It encompasses taxable income net of allowable expenses, as outlined by the IRAS. 

Revenue figures disclosed in the company’s tax return (Form C) serve as the basis for ECI calculations. Policymakers rely on ECI data to monitor economic trends and industry performance, emphasising the role of accurate reporting in shaping policy decisions.

Who Needs to File ECI

All companies in Singapore, unless exempted, must submit their ECI within 90 days of the end of their financial year. Exemptions apply to specific entities and exemption criteria. It’s crucial to review these to determine eligibility and ensure compliance with IRAS regulations.

ECI Filing Waiver Criteria

Companies may qualify for waivers from filing ECI if:

• Annual revenue is $5 million or below for the financial year.
• ECI is nil for the Year of Assessment (YA), before deducting the exempt amount under the partial tax exemption scheme or the tax exemption scheme for new start-up companies.

Entities Exempt from ECI Filing

Certain entities do not need to file ECI, including:

• Foreign ship owners or charterers whose local shipping agent has submitted or will submit the Shipping Return.
• Foreign universities.
• Designated unit trusts and approved CPF unit trusts.
• Real estate investment trusts that have been granted the tax treatment under Section 43(2) of the Income Tax Act 1947.
• Cases specifically granted the waiver to furnish ECI by IRAS.

Corporate Income Tax Rebate (CIT) for YA 2024

As announced in Budget 2024, a CIT Rebate of 50% of the corporate tax payable will be granted to all tax paying companies for YA 2024. 

Additionally, the government will provide a CIT Rebate Cash Grant of at least $2,000 for eligible companies that employed at least one local employee in 2023. 

The maximum rebate and grant amount per company is $40,000. This rebate aims to support companies in managing rising costs and enhancing financial resilience.

Implications for ECI

ECI filings should not include the CIT Rebate amount, as it will be automatically computed and allowed in the company’s YA 2024 tax assessment by IRAS. Finalised tax assessments impacted by these changes will receive amended notices by August 31, 2024.

Benefits of Filing ECI On Time

Timely ECI filing offers several benefits, including:

• Avoiding Penalties: Filing ECI within the stipulated time frame helps companies avoid penalties and interest charges associated with late submission.
• Maintaining Compliance: Compliance with ECI filing requirements demonstrates corporate responsibility and adherence to regulatory standards, enhancing the company’s reputation and credibility.
• Accurate Tax Planning: Early submission of ECI enables companies to accurately forecast their tax liabilities and plan their finances accordingly, minimising surprises during tax assessment.

Did you know? ~ Counto’s tax experts are backed by in-house proprietary AI tax software, which has achieved  IRAS ASR+ Tier 3 qualification, the highest possible accreditation in Singapore.

Navigating the ECI Filing Process

1. Ensuring accurate and timely ECI filings requires a systematic approach:
2. Timely Submission: File ECI within three months of the financial year-end to avoid penalties and maintain compliance.
3. Preparation and Documentation: Gather essential documentation, including the company’s Unique Entity Number (UEN) and CorpPass login details. Access accounting records to facilitate accurate reporting.
4. Online Filing: Utilise IRAS’ online platform (mytax.iras.gov.sg) for seamless ECI submission. Refer to available guides for step-by-step instructions on filing as a company or tax agent.

Penalties for Non-Compliance

Failure to file ECI or late submissions incur penalties, including the issuance of a Notice of Assessment (NOA) based on IRAS estimates. Companies must pay the assessed amount within one month of receiving the NOA, forfeiting instalment payment options. 

Persistent non-compliance may result in enforcement actions by the authorities, underscoring the importance of adhering to filing requirements.

Summary

By understanding the ECI filing process and leveraging available exemptions and rebates, SMEs in Singapore can ensure regulatory compliance. Early filing not only facilitates smoother operations but also positions your company for financial resilience and strategic planning. 

Discover how Counto helps small businesses like you save time and money

With an intelligent platform combined with experienced accountants and tax specialists, who are dedicated to helping businesses achieve greater financial efficiency at an affordable price. Experience a smarter way to outsource your accounting with confidence. Speak to us directly on our chatbot, email us at [email protected], or contact us using this form.

Here are some articles you might find helpful:

Filing requirements for Pte Ltd companies 

Do I need to register for GST?

The importance of working capital