Sole proprietor income tax in Singapore: revenue sets the paperwork, profit sets the tax

THE STARTING POINT

The business is not a taxpayer. You are.

A company files its own return and pays its own tax at its own rate. A sole proprietorship does neither. IRAS assesses the business income in your name, as part of your total personal income, at resident individual rates. There is no separate business tax return and no separate business tax bill.

Three practical consequences follow, and between them they explain most of what confuses people:

• Your profit stacks. Business profit sits on top of salary, rental and other income, so it is taxed at your marginal rate — not at a flat business rate. A profitable side business is taxed at the rate your existing income has already pushed you into.
• Your loss is usable. IRAS draws the distinction directly: a self-employed individual can claim trade losses against trade income, where an employee cannot. This is one of the reasons reporting the income in the right box matters.
• Drawings are not salary. You cannot pay yourself a deductible wage out of your own business, because there is no separate entity to pay it. Money you take out is drawings — it does not reduce your profit and it is not a business expense.

The first $20,000 of chargeable income is taxed at nil, with rates rising in bands from 2% to 24% on income above $1 million from YA 2024 onwards. IRAS has granted a personal income tax rebate in some recent years — 50% of tax payable capped at $200 for YA 2024, and 60% capped at $200 for YA 2025 — but a rebate is announced year by year, so do not assume one is coming.

WHO HAS TO FILE

You may already be self-employed without having registered anything.

People assume the obligation begins with an ACRA registration or a certain level of income. It begins with the activity. Any one of these three puts you in scope:

THE THREE TIERS

Revenue decides how much work filing is.

This is the part that surprises people, and it is worth stating plainly: your filing burden is set by turnover, not earnings. A consultant with $150,000 of profit on $180,000 of revenue reports two numbers. A trader with $8,000 of profit on $600,000 of revenue must upload a certified statement of accounts. The second person earns a fraction of the first and does considerably more work at filing time.

Most coverage of this topic stops at two tiers and misses the third. The $500,000 line is the one with teeth: at that point the accounts stop being something you keep and become something you submit, certified by you as true and correct, as a single attachment on the Consolidated Statement page of the e-Form. The 2-line threshold rose from $100,000 to $200,000 with effect from YA 2021 — older guidance still quoting $100,000 is describing a rule that changed five years ago.

Below $500,000 of revenue, and provided you are not claiming carry-back relief, foreign tax credit or tax deducted at source, IRAS publishes a free Record Keeping Assistant spreadsheet built for exactly this population. It is a reasonable floor if you have nothing at all — though at the point where revenue is climbing towards the 4-line tier, a spreadsheet is usually the thing that breaks first.

THE YEAR YOU ARE FILING

Your year-end choice moves which YA the income lands in.

You choose your accounting period when you start. Most businesses end it on 31 December, and that keeps the arithmetic simple: the calendar year 2025 is assessed in YA 2026, filed by 18 April 2026. But IRAS lets you close on any date, and a non-December year-end quietly shifts which income belongs to which Year of Assessment.

Both rows are YA 2025, but they cover different money. The March year-end assesses income earned up to nine months earlier than the December one. That is not a problem in itself — it is only a problem when someone reconciles a calendar year of bank statements against a non-calendar accounting period and cannot work out why the figures will not agree. If you have no reason to pick another date, 31 December is the one that will cause you the least trouble.

EXPENSES

Wholly and exclusively, and the list of things that are not.

The test is that the expense was incurred wholly and exclusively to earn your business income. Personal, private and capital expenses fail it. The difficulty for a sole proprietor is structural rather than legal: because there is no separate entity, the boundary between business and private spending runs through your own bank account, and IRAS looks at it closely for exactly that reason.

The costs below are specifically disallowed when they relate to you, the sole proprietor or partner — even though several would be perfectly normal deductions if incurred for an employee:

Vehicles are the other reliable trap. Expenses on private cars and private-hire cars carrying E, Q or S plates — repair, maintenance, parking, petrol — are disallowable, and IRAS says this holds even where the car was used for business. No capital allowance is available on them either. Vans, lorries and motorcycles acquired for business use do qualify for capital allowances under sections 19 and 19A, and the COE cost forms part of the vehicle’s cost for that purpose. Where driving is itself your trade, IRAS publishes separate industry guidance — go to that rather than the general rule.

WHAT GOES WRONG

Four mistakes IRAS sees often enough to publish.

These are not edge cases. IRAS maintains a page of common filing mistakes for self-employed individuals, and the useful thing about it is that none of them are attempts to avoid tax — they are all people trying to file correctly and misreading how the form works.

THE GST LINE

The $1 million test is applied to you, not to each business.

GST registration becomes compulsory when taxable turnover has exceeded $1 million at the end of the calendar year, or is expected to exceed $1 million in the next 12 months. For a sole proprietor the aggregation rule is the part worth knowing in advance: IRAS applies the test to the total taxable revenue of all your sole-proprietorship businesses taken together with income from your trade, profession or vocation. Three separate businesses under one NRIC are one test, not three.

For partnerships the equivalent rule looks at all partnership businesses with the same composition of partners, excluding an LLP. Either way, the mistake is to watch each business against the threshold separately and be surprised by the total.

IF IT SLIPS

Not filing costs more than filing something imperfect.

Missing the 18 April deadline is an offence. IRAS can issue an estimated Notice of Assessment — which you must pay within one month even if you object and are waiting on the outcome — offer to compound the offence for up to $5,000 depending on your past compliance, or issue a Notice to Attend Court. Fail to file for two years or more and a conviction can carry a penalty of twice the tax assessed plus a fine of up to $5,000.

Late payment is a separate matter from late filing. Tax is due one month from the date of the Notice of Assessment, and unless you are on an approved instalment plan a 5% late payment penaltyapplies to the unpaid amount. Note what is not there: unlike withholding tax, IRAS does not publish a further monthly escalator on individual income tax — the widely repeated “1% a month on top” is borrowed from a different tax. What IRAS can do instead is appoint your bank, tenant, employer or conveyancing lawyer to recover the money, and issue a Travel Restriction Order stopping you from leaving Singapore until it is paid.

Two things are worth doing rather than waiting. An extension of time to file can be requested through myTax Portal. And a late payment penalty can be appealed online, with an instant outcome — but only if the overdue tax has been paid in full by the date on the penalty notice and no waiver has been granted in the past two calendar years. Both are far cheaper than silence.

Common questions.