Provided by EnterpriseOne
Partners in a partnership are considered "self-employed" - i.e you do
not pay yourself any wages. The business income is treated as part of
your total personal income and taxed at personal income tax rates.
This guide is not meant to be a comprehensive guide on income tax.
It only covers the tax obligations of partners.
The Basics
Tax Rates and Exemptions
Deductions, Relief And Rebates
Medisave and Income Tax
Filing Your Tax Return
Payment Of Taxes
Where Can I Get Help?
The Basics
Taxable Income
• Any income that is " accrued " or received in Singapore by a
person or business is subject to income tax.
• In essence, it means that if your customer pays you for a
product in Singapore or you receive money from your overseas
sales in Singapore, the money is subject to tax.
• Taxable income includes income from your business, salary from
employment, interest earned on your deposits and rental income.
Capital Gains
• Capital gains are not subject to tax.
• For instance, if you buy and sell shares at a profit, the profit is
not subject to tax. However, the dividends that you earn from the
shares are income and subject to tax.
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Tax Rates And Exemptions
• As your business income forms part of your personal income,
the two are calculated together when you file your tax returns.
• Your business income is reported separately (Form B or B1) and
added to all your other personal income. The total is then
subject to personal income taxes.
• The tax rates for Year of Assessment 2005 are shown in the
table below. Taxes are charges progressively (0% - 22%) on
your chargeable income. The chargeable income is your
busines / trade income plus any other personal income, minus
all deductions, reliefs and rebates.
| Tax Rates for Year of Assessment 2005 |
| |
|
Chargeable
Income (S$) |
Rate (%) |
Gross Tax
Payable (S$) |
| |
On the first
On the next |
20,000
10,000 |
0
4 |
0
400 |
| |
On the first
On the next |
30,000
10,000 |
6 |
400
600 |
| |
On the first
On the next |
40,000
40,000 |
9 |
1,000
3,600 |
| |
On the first
On the next |
80,000
80,000 |
15 |
4,600
12,000 |
| |
On the first
On the next |
160,000
160,000 |
19 |
16,600
30,400 |
| |
On the first
On the next |
320,000
320,000 |
22 |
47,000
|
IRAS has announced that the tax rate will be lowered to 0% - 21%
for Year of Assessment 2006 and further reduced to 0% - 20% for
Year of Assessment 2007.
See: Latest tax rates at IRAS
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Deductions, Reliefs And Rebates
Your chargeable income ( the portion that is subject to taxes ) is your
total income minus any deductions and reliefs. You can also utilise
tax rebates to reduce your taxes.
Business-Related Deductions
• Allowable Business Expenses
You can deduct any expenses that are incurred solely for the
purposes of generating income for our business. Items such as
rent, wages paid to employees and expenses on stationery and
supplies are all considered "allowable business expenses".
See: Tips on claiming for expenses
• Capital Allowances
You can claim capital allowances on plant and machinery that
you have purchased for your business.
See: Tips on claiming for capital allowances
• Unutilised Losses And Capital Allowances
Losses and capital allowance can be used to offset your total
chargeable income. Any part of the losses or capital allowance
not fully used to offset income in the financial year is termed as
as "unutilised".
- You can also carry forward unutilised losses and capital
allowances to offset income made in the next financial year.
- With effect from Year of Assessment 2006, you can also
carry back unutilised losses and capital allowances of up to
S$100,000 in the current year to offset the income made in
the preceding year.
See: Losses and capital allowances
Personal Donations, Reliefs And Rebates
• As your trade income forms part of your personal income, you
can also use personal reliefs and donations to reduce your taxes.
• You can claim deductions for donations made to certain
charitable organisations.
See: Donations
• You can claim tax reliefs. There are various types of tax reliefs
such as course fees, child, wife/handicapped spouse, etc.
See: Tax reliefs
• You can claim tax rebates such as the Parenthood Tax Rebate.
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Medisave And Income Tax
Compulsory Medisave
• All self-employed persons who are Singapore Citizens or
Permanent Residents must contribute to their Medisave as long
as their net trade income exceeds S$6,000 per year.
• Net trade income is your business income minus all allowable
business expenses, capital allowances and trade losses.
Calculation Of Medisave Contribution
• The amount of Medisave you contribute is a percentage of your
total business trade income subject to a maximum cap.
Age As At
1st Jan |
Year 2005 |
Year 2006 |
Year 2007 |
| Below 35 |
6%
(max. S$3,600) |
6%
(max. S$3,240) |
6%
(max. S$3,240) |
| 35 to below 45 |
7%
(max. S$4,200) |
7%
(max. S$3,780) |
7%
(max. S$3,780) |
| 45 and above |
8%
(max. S$4,800) |
8%
(max. S$4,320) |
8%
(max. S$4,320) |
How And When To Contribute To Medisave
• After you file your income tax, IRAS will send you a Notice of
Computation (NOC) which states clearly how much you have to
contribute.
• You can make your contributions directly to the Central Provident
Fund (CPF).
Relief For Medisave Contributions
• You can claim relief for your Medisave contributions and voluntary
contributions subject to a fixed cap.
For More Information
• IRAS: Medisave and the self-employed
• CPF : Check your outstanding Medisave liabilities
• CPF : FAQs on Medisave and the self-employed
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Filing Your Tax Return
How Do I Pay Taxes?
• The precedent partner must file a tax return on behalf of the
entire partnership (Form P). The precedent partner is appointed
or by default is the first name on the partnership agreement.
• All partners, including the precedent partner, must report their
share of profit/loss from the partnership business in their
Individual Income Tax Return (Form B or Form B1).
• Based on your tax return, the Inland Revenue Authority of
Singapore ( IRAS ) will assess how much tax you need to pay.
IRAS will then send you a Notice of Assessment and Statement
of Account.
• You can submit your tax return by:
- E-Filing at myTaxPortal; or
- Filling up Form B/B1/P and mailing it back to IRAS
See: - Getting and submitting your partnership income tax form (Form P)
- Getting and submitting your partnership income tax form (Form B or B1)
When Do I File My Tax Return?
• You need to file your tax return by 15 April every year. You should
be filing your trade income for the previous year.
• Example: In 2005, you should be filing a return on business
income for year 2004.
• If you fail to file your tax return by 15 April, you will have
committed an offence under the Income Tax Act.
See: Penalties for late or non-filing of income tax forms
How Do I Report My Business Income?
• The precedent partner reports the entire partnership's business
income using Form P. On Form P, you will need to report:
- turnover
- gross profit/loss
- allowable business expenses
- adjusted profit/loss
• If the partnership's turnover is more than S$500,000, you have
to submit a certified statement of accounts together with
Form P.
• From Year of Assessment 2005, the precedent partner of a
husband and wife partnership must also file Form P.
• All partners, including the precedent partner, must report their
share in the business income using Form B or B1. On this form,
you will need to report:
- your share of the profit/loss after all deductions ("divisible
profit/loss")
- your salary, bonus, CPF and benefits from the partnership
- your share of "other partnership income"
" Divisible profit/loss " is your share of the profits/loss after
deducting:
- all partners' salaries, bonuses, CPF and benefits
- all partners' share of the " other partnership income "
" Other partnership income " refers to income from:
- savings (e.g. interest)
- investments (e.g. Singapore dividends)
- rent
- foreign income
See: - Reporting partnership income on Form P
- Reporting your income on Form B or B1
- Working sheets for preparing Statement of Accounts (WORD)
Can You Help Me Calculate My Taxes?
• You can use the Working sheet for the self-employed (WORD) to
calculate the amount of income tax you need to pay.
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Payment Of Taxes
When Do I Pay My Taxes?
• You have to pay your taxes within 1 month of receiving the Notice
of Assessment and Statement of Account.
• You can pay off all you taxes at one go or by monthly instalments
using GIRO. You should pay your taxes promptly or you may have
to pay penalty fees.
See: Making payments and claiming refunds
What If I Do Not Agree With The Tax Assessment?
• If you disagree with the tax assessment, you can write to IRAS
and state the reasons why you feel the tax assessment is
incorrect.
• Please note that you must still pay your taxes within 1 month of
Notice of Assessment even if you object to the assessment.
See: Objecting to your individual tax assessment
What If I Object To My Share Of The Profit/Loss In The Partnership
• If a partner wants to object to his share of the profit/loss, the
objection must be lodged by the precedent partner. The precedent
partner must write to IRAS stating clear reasons for the objection.
See: Objecting to partnership allocation
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Where Can I Get Help?
• Visit these websites and web resources for more in-depth
information on partnership income tax or consult with your
accountant.
- IRAS website for the self-employed
- Frequently Asked Questions on partnership income tax
- Download all tax forms
• You can also contact IRAS:
- Local Toll-Free: 1800 356 8611
- International: (65) 6356 8611
- Fax: (65) 6351 4358
- Email addresses of IRAS offices in charge
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This article is a simplified write-up of taxation in Singapore and is not intended to replace
advice from a tax professional. You should speak to your accountant or contact the
Inland Revenue Authority of Singapore (IRAS) for more information.
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