According to Singapore’s Companies Act, the primary legislation regulating the conduct of companies in the country, companies must comply with the annual filing requirements of the Accounting and Corporate Regulatory Agency (ACRA), as well as the Inland Revenue of Singapore (IRAS).
Who is obligated to be audited?
The Companies Act states that private limited companies must have their financial statements audited by a qualified public accountant at least once a year.
Annual General Meeting
An annual general meeting (AGM) is obligatory for a Singapore company. The AGM can be held anywhere in the world, whereby the shareholders discuss the following items:
- Approval of the audit reports;
- Re-elect directors (if required);
- Re-appointing auditors;
- Declare dividends; and
- Transact other.
AGMs are to be held:
- Once every year;
- Within 15 months from the previous AGM; or
- Six months from the FYE date.
Appointing auditors
Within three months of company incorporation, company directors must appoint an auditor, unless they fall under the following criteria:
- Annual turnover is less than S$5 million (US$3.7 million);
- The total number of shareholders is less than 20; and
- All shareholders are individuals and not corporations.
The role of the auditor is to report if the company’s financial statements comply with the relevant financial reporting standards and to provide an objective analysis of the company’s financial performance. Additionally, only public accountants registered with ACRA can conduct company audits.
Accounting Standards
There are two main accounting standards, set out by the Accounting Standards Council (ASC) of Singapore, that companies are required to adhere to when preparing their financial statements:
- The Singapore Financial Reporting Standards (SFRS) - based on the International Financial Reporting Standards (IFRS)
- Singapore Financial Reporting Standard (SFRS) for Small Entities – based on IFRS for SMEs.
Further, there are approximately 41 different standards that provide specific guidelines for financial reporting, reporting inventory, industry related standards, among others.
Financial statements are prepared under the accrual basis of accounting, which is one of the main principles of the accounting standards in Singapore. Under this accounting method, revenues are recorded when a transaction occurs rather than when the payment is received.
Fiscal year
All companies in Singapore should determine a financial year-end (FYE) (that is, the last day of the company’s first financial year) after incorporation.
After the FYE, the company must hold their AGM as well as file their annual returns (AR). Listed companies must file their AR within five months and non-listed companies within seven months.
Many companies choose December 31 for their FYE while others have chosen the end of any quarter (March 31, June 30, and September 30).
In deciding an FYE, companies should consider whether the chosen date affects their eligibility to receive tax incentives. Qualified new companies can receive a 75 percent tax exemption on the first S$100,000 (US$ 74,628) of chargeable income during the first three consecutive years. There is a 50 percent tax exemption on the next S$100,000.
For certain companies, it is, therefore, more advantageous to have December 31 as their fiscal year-end date.
Audit exemptions
Companies that qualify as ‘small’ are exempted from having their accounts audited and from appointing an auditor.
They first need to fulfill two of the three following criteria:
- Total revenue must not exceed S$10 million (US$7.3 million);
- The total assets of the company should not exceed S$10 million (US$7.3 million)
- The total number of full-time employees must not exceed 50.
Group company audits
Holding companies and their subsidiaries can also be exempt from audit compliance if they qualify as a ‘small group’. To qualify, the group (comprising all the companies) should fall under two of the three criteria as written above for small companies.
Annual reports
Singapore’s authorities require companies to submit their estimated chargeable income within three months from the financial year-end. This accounting should include the following:
- Statement of comprehensive income (profit and loss accounting);
- Company details;
- Balance sheet;
- Shareholder details;
- Dates of annual returns and AGM;
- Detail of company officers;
- Cash flow statement; and
- Statement of changes in equity.
Penalties for non-compliance
Businesses that fail to hold an AGM and are late to file financial statements are at risk of fines, summons, and even an arrest warrant issued by ACRA.
Failing to file tax returns for two years or more will result in a Court summons, and upon conviction, the company will be ordered to pay a penalty that is twice the amount of tax and a fine of up to S$1,000 (US$746).
In addition, the penalty for late annual lodgments beyond three months by Singapore-incorporated companies, variable capital companies, and limited liability partnerships will go up to S$600 (US$448).
