You are considered a self-employed person in Singapore if you are a citizen or a permanent resident of the country and derive your income through any trade, business, profession, or vocation excluding employment under a contract of service. In Singapore, there is an important difference between a contract of service and a contract for service. The latter applies to self-employed persons in Singapore. As a self-employed with your own business, you work for yourself and you are in the position to realize a business profit or loss. Your income is derived from the buying and selling of goods, or from providing professional or personal services. The most common examples of self-employment in Singapore include taxi drivers, freelancers, and sole-proprietors. You’ll need to be a citizen or a permanent resident to conduct freelance work in Singapore legally. If you want to practice as a self-employed in the country you should obtain a permit.
Accounting Obligations
Since you are running your own business, you are required to keep proper records and accounts. This includes precise records of your income and expenses. For sales, you must ensure to have a cash register tape, daily sales record book, and invoices. For expenses, you will need receipts and a daily purchases record book. You are obligated to issue serially printed receipts and keep a duplicate of the receipts if your gross income in any year is:
- More than $18,000 from the sale of goods; or
- More than $12,000 from providing services.
In case you adopt practices that can ensure the completeness and accuracy of the recording of all your sales receipts, you don’t need to issue printed receipts.
Annual Statement of Accounts
At the chosen end of your accounting period, you must prepare the statement of accounts. It should include the following:
- Profit and Loss Accounts
- Balance Sheet
This statement is used to prepare a smaller 4-line statement that is necessary for filing your tax return. You should include the following:
- Revenue;
- Gross profit;
- Allowable Business Expenses;
- Adjusted profit
Tax Obligations
As a self-employed person in Singapore, your income is subject to individual income tax rates. It is a business income and not a salary. You must declare your income on an annual basis and choose an accounting period for your business. In most cases, you should opt for 31 December as a common year-end but you are free to choose an accounting period that ends on any date.
Filing Your Taxes
At the beginning of the year and usually by 15 Mar, IRAS will send you a notification or an individual income tax return to report your income from business or as well as your income from all other sources. You must file an Income Tax Return if you receive a letter, form, or an SMS from IRAS informing you to do so. You can file your taxes on paper or via e-Filing.
MediSave Contributions for Self-Employed
If you are a self-employed person and earn a yearly net trade income of more than $6,000 a year, you need to contribute to MediSave. Your MediSave payable is based on your age and net trade income for the year. The younger you are the less you pay and the more you earn, the more you pay. There is also a maximum contribution rate that may be as low as $5,760. Below you can find a reference to the applicable MediSave rates.
License Requirement for Self-Employment
In general, you don’t need a license to practice as a self-employed person in Singapore. Of course, there may be a license requirement for certain businesses like transport, food production, and sale, real estate agency, etc. For technical or creative services (developers, software engineers, designers, artists, photographers) you don’t need a license in Singapore.
Growing Your Business
As your business grows, it pays to consider other corporate structures (e.g. a Singapore Private Limited) that could lower your effective taxes. Startups in Singapore are entitled to use some generous tax exemption schemes as in the firm’s first $100,000 of chargeable income would be completely tax-free, with the next $200,000 being 50% exempted.
Useful resources
