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Corporate Income Tax 101


Have you ever wondered what principles govern your corporate income tax calculation? (for those of you who have companies, or have come across such computations, of course)

Does it look like a bunch of figures ‘added back’ or ‘deducted’, or does there actually seem to be some method to the ‘madness’? The answer is the latter, most certainly!

In a nutshell, for a basic tax computation, you start with:

1)      the Net Profit Before Tax figure

2)      Then you make adjustments to this figure to account for items which are ‘capital’ in nature (by way of adding back). By ‘capital’, we mean that these items are not incurred in the production of income. For example, incorporation expenses – as these are deemed to have been incurred before the start of business, as opposed to say rental expense, which is a deductible item.

3)      Once you have obtained the ‘adjusted’ profit after step 2), you can then deduct unutilized losses, capital allowances and/or donations from previous years, subject to certain conditions, to ‘lower’ your “chargeable income”

4)      This chargeable income will can be further ‘lowered’ with the aid of exemptions such as the partial tax exemption or the start-up tax exemption

5)      Finally, the tax liability is calculated at a rate of 17% typically

6)      But that is not the end! Corporate tax rebate may be applicable to reduce the balance calculated in 5) once more!

If the above still seems fuzzy, do drop us a line, and we here at Joy Management Services Pte Ltd will be more than happy to assist 😊

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