Filing Requirements for Sole Proprietors: All You Need to Know

As a solo entrepreneur running a sole proprietorship in Singapore, understanding your filing obligations is paramount to maintaining compliance with the law. Here’s a comprehensive guide to annual return filing and record-keeping for sole proprietors:

Personal Income Tax Filing

In Singapore, a sole proprietorship isn’t a separate legal entity. Hence, the business income is treated as the owner’s personal income. Sole proprietors must file their personal income tax returns annually, reporting business income and expenses on forms like Form B for residents and Form M for non-residents.

Tax Deadlines

Resident sole proprietors generally need to file their personal income tax returns by April 15th each year. Non-residents have varying deadlines based on their tax residency status.

Record Keeping

Maintain meticulous financial records, including income statements, receipts, invoices, and expense records. Proper record-keeping is crucial for accurate tax reporting and to navigate audits or inquiries by the Inland Revenue Authority of Singapore (IRAS).

Record Keeping Guidelines

• Separate Business and Personal Finances: Keep business and personal finances separate with dedicated bank accounts.
• Detailed Financial Records: Track all sales, revenue, expenses, assets, liabilities, and debts related to the business.
• Organised Records: Use accounting software, maintain a filing system for physical documents, and regularly reconcile bank statements.
• Retention Period: Keep financial records for a minimum of five years from the end of the financial year and consider retaining important documents for a longer period.
• Digital Records: Utilise accounting software or cloud-based solutions for secure digital record-keeping, ensuring regular backups.

Tax Reporting Methods

Adopt the accrual method of bookkeeping for accurate reporting. However, for cash-based businesses, reporting based on bank balance changes may suffice.

Tax Rates and Carry Over Losses

Sole proprietors are taxed at personal income tax rates. Business losses from previous years can offset the current year’s tax liability.

When to Consider Conversion to Private Limited Company

Consider transitioning to a Private Limited Company when net income exceeds $250,000, to benefit from a flat tax rate of 17% and enhanced compliance requirements.

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