The Freelancers Academy

How to file taxes as a Singaporean Freelancer

As an employee, you don’t have to worry about filling your taxes because your company will handle that for you. But as a freelancer running your own business, you are the company and you need to file your taxes.

Taxes are important. They can be a burden, but they’re a necessity. No matter where you live, your taxes must be filed. You must file and pay them. You can’t avoid taxes. It’s a law.

Filing of taxes became apparent here in Singapore when Covid-19 hits the shore and the majority of the freelancers are struggling with keeping themselves afloat. In order for the government to provide aid to our freelancers, the only way to determine that their incomes are affected is by tracking their income tax.

So what happens when you don’t file your taxes or late submission?

To put it bluntly, you’re not a freelance or self-employed person in the eyes of the government.

Every year as a freelancer or self-employed person here in Singapore, we will get a text reminding us to file our income tax. During pre-covid, this message is often overlooked and filing income tax seemed like a chore to most as getting income was more important.

However, only when our income is largely affected for a period of time and we seek help from the government then it is hard for them to provide financial aid because there’s no proof of our income.

Therefore, this Covid pandemic that happened in 2020 has taught many freelancers or self-employed people the importance of tax filing.

What kind of taxes do we need to pay as freelancers in Singapore?

 “Freelancers are obliged to pay taxes (for the business income they earned in a year). This will be considered trade income, and it will be taxed at individual income tax rates. You are required to pay income tax once your income exceeds $22,000 in a year. However, you are exempted from paying tax if you are earning less. This means that if you’re getting an average take-home pay of ~$1800/month, you will have to pay income taxes to IRAS.”

Understanding the requirements for paying income tax based on your income varies. That’s why when we take charge of our income, we also need to take charge of filing our income tax.

Here’s a quick overview of how to file your income tax
  • Determining tax obligations.
  • Deciding on the accounting period (January-December/July-June).
  • Preparing a two or four-liner statement (as shown in the figure below).
  • Filing income tax to IRAS.
Here are some examples for your reference:

Example: Kelly provides consultancy services and offers consultation to companies. He earned S$80,000 last year. His allowable business expense is about $5,000. Using the 2-Line statement, this will be the calculation:

RevenueS$80,000
Adjusted profitS$75,000

Example: Natalie sells kids’ clothing. She earned S$500,000 last year. The cost of her goods is $150,000. Her allowable business expense is $50,000. Since her income earned is more than S$200,000. She will report her tax by using a 4-Line statement.

RevenueS$50,000
Gross Profit/LossS$150,000
Allowable Business ExpensesS$50,000
Adjusted profitS$300,00

For more information, you may want to check out the IRAS website for Personal tax Calculator to calculate the amount of taxes you have to pay.

In a nutshell, as a freelancer, it is our duty to not only take charge of our income but also the responsibility of filling our income taxes on time.

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Reference site:
https://www.lanturn.com/singapore-tax-guide-for-freelancers-and-self-employed-persons/

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