Trade, Business, Profession and Vocation Income

When you have a trade, business, profession or vocation you must keep full records of your business transactions and prepare certified statements of accounts, this includes:

  1. A Profit and Loss account
  2. A Balance Sheet

Ensuring your accounts are accurate and up to date with all relevant information will make managing your business more straightforward and ensure that you are prepared for any audits or questions that may be asked by the IRAS (Inland Revenue Authority of Singapore).

When preparing a report of your accounts you should include a summary of accounts which includes:

  1. Business Revenue (total of business funds received from Income/Sales before deduction of expenses for the entire tax year)
  2. Business Gross Profit or Loss
  3. Details of allowable business expenses

Understanding Business Revenue

It is important to understand that from an income tax perspective, the business revenue accounts must include the entire tax year. You can keep your own records that split into monthly accounts, quarterly reports etc. This is a common requirement for most business functions to measure their relative financial success and identify areas of opportunity but the IRAS are only interested in the full tax year amount (though they may query or audit a specific period as necessary).

Business revenue reports should include:

  1. All payment and fees received or due (receivable) for your business services.
  2. All proceeds for the sale of business goods.
  3. All bills issued to customers whether they have settled their balance (paid) or if their bill is outstanding (unpaid).
  4. Selling price of goods/materials expended for non-business use.

Depending on your business type, you could have a large amount of account entries (high transaction business such as online sales) or a small amount (low transaction business such as provision or services or contract). Regardless of your transaction rate, the key is to maintain robust and regular accounts. If you have a low transaction business you may well be able to maintain your business records in a simple spreadsheet such as Microsoft Excel but if a high transaction model it is essential you invest in a robust accounting software solution to avoid problems with your own account keeping and of course unnecessary attention of the IRAS.

You can calculate and understand how Trade, Business, Profession and Vocation Income affects your income tax return using the Singapore Tax Calculator

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