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Sole Proprietorship
- How to complete Part 5 of BIR60
| 1. |
Where a business is 100% owned by
you, you should make tax reporting for that business on Part
5 of your Tax Return - Individuals (BIR60). |
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| 2. |
How to Complete the Boxes in Part
5 of BIR60
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| (a) |
Put a 'tick' in the 'Yes' Box in
the second line of Part 5 of BIR60 to indicate that you have
a sole-proprietorship business, and complete the remaining items
in that Part. |
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| (b) | If you own more than 1 sole-proprietorship
business
Supply details of the first and second sole-proprietorship businesses in
the space provided in BIR60 and provide those particulars
of the other businesses in the same format on a separate sheet.
Separate accounts and computations should be submitted for
each business if its gross income exceeded $2,000,000.
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| (c) | Gross Income
This means ALL TYPES OF INCOME and should include sale of capital assets and any other
non-taxable income, whether or not derived from the principal business activity.
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| (d) | Turnover
This means all income arising from your principal business activities. Items that arise
incidentally or are exceptional in nature should be excluded (for example, profits from the sale
of capital assets).
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| (e) | Gross profit/(loss)
Generally refers to the difference between turnover and cost of sales. If you are not engaged
in the trading of goods and commodities and no such figure exists in the accounts, insert "0" in the Box.
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| (f) | Net profit/(loss) per accounts
Generally refers to the difference between income and expenses/deductions.
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| (g) | Assessable Profits/(Adjusted Losses)
You may obtain a pro forma tax computation
to make the necessary adjustment. A separate computation should be prepared for each business.
If you have more than one business, make sufficient copies of the pro forma before preparing the computations.
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| (h) | Approved charitable donations
Enter the total amount of approved charitable donations made during the year.
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| (i) |
Mandatory contributions to Mandatory Provident
Fund Scheme Enter the amount of mandatory contributions
paid by you to a mandatory provident fund scheme as a self-employed
person.
| Year of assessment |
Maximum deduction ($) |
| 2007/08 to 2011/12 |
12,000 |
| 2012/13 |
14,500 |
| 2013/14 onwards |
15,000 |
If you have claimed deduction for contributions to recognized
retirement scheme under Salaries Tax (Part 4.3 of BIR60),
your claim under Part 5 for Profits Tax should be limited
to the balance. For example, if the maximum amount of deduction
allowable to you in that year of assessment is $14,500 and
you have claimed deduction of $8,400 under Salaries Tax (Box
33, Part 4 of BIR60), the maximum amount of deduction you
may claim under Profits Tax (Box 42, Part 5 of BIR60) will
be $6,100.
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| (j) | Transactions for/with non-resident persons
If you have transactions for/with non-residents during the year, put a
'tick' in the 'Yes' Box and complete Section 5 of the Appendix
to BIR60. |
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| (k) | Dormant Businesses
Even if your business has been dormant during the year, you are still required
to complete items (1) and (2) and enter '0' in items (3) to
(9) under Part 5 of BIR60. |
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| (l) |
What if I have a business to report but Part
5 of BIR60 was left blank
We may estimate the amount of assessable profits and issue
a notice of assessment demanding you to pay Profits Tax. To
avoid the issue of an estimated assessment, even if your sole
proprietorship business had ceased, was inactive or operating
in losses for the year concerned, you should still complete
all the Boxes in Part 5 of BIR60 and should not leave them
blank. You may enter '0' where applicable.
We will impose penalty on omission / understatement of profits
and on incorrect return. In computing penalties, where Part
5 of BIR60 is left blank (resulting in omissions), the amount
of the ultimately assessed profits will be taken to be the
amount of profits undercharged. |
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| 3. | Documents to be submitted |
| (a) |
Small Businesses (i.e. gross income of
which do not exceed $2,000,000)
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- So long as the gross income of your sole proprietorship
business does not exceed $2,000,000, you are not required
to attach any financial statements to your tax return. Otherwise,
you must submit accounts.
- Even if your business is a Small Business, you must prepare the accounts, complete
the tax return in accordance with the accounts prepared, and retain the accounts and documents as
we may ask you to submit them later for review or other tax purposes.
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| (b) | Businesses other than Small Businesses
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| - You have to submit a set of certified accounts - Balance Sheet
and the Trading and Profits & Loss Accounts.
- You should also submit a tax computation with supporting schedules, showing how the declared
amount of Assessable Profits/(Adjusted Losses) is arrived at.
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| 4. |
To know about the completion of other
parts of BIR60 and other matters relating to the completion
and filing of BIR60, see
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Partnership - How
to complete BIR52
| 1. |
Where a business is not solely owned
by you for the full year, you should not report it in Part 5
of BIR60. Rather, you should report on the Profits Tax Return
(BIR52) for that business. |
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| 2. |
How to Complete BIR52
See |
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Sole Proprietorship changed to Partnership or vice versa
| For tax purposes, |
| 1. | We will not regard the business as ceased. |
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| 2. | The sole proprietorship business and
the partnership business will be treated as the same business. |
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| 3. | You should have notified the
Business Registration Office of the change in ownership of your business. Upon receipt of this
information, |
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- if a sole proprietorship business were changed to a partnership
business (by admitting a partner),
we will issue a Profits Tax Return (BIR52) in the name
of the partnership for the year of change and for subsequent
years.
- if a partnership business were changed to a sole proprietorship business (by retirement of all
other partners),
we will stop to issue a Profits Tax Return (BIR52) in
the name of the partnership as from the year after the
year of change.
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| 4. |
The profits for the year of change
(the year of admission of a partner or retirement of all other
partners) should not be reported in Part 5 of your BIR60. |
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| 5. |
The profits for the year of change
(whole year) should be reported in BIR52 issued in the name
of the partnership business. |
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Commencement / Cessation of Business
| 1. |
Commencement of Business during
the year 2012/13 |
- If you closed your first accounts after 31 March 2013,
probably there would be no assessable profits for the year
of assessment 2012/13.
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| Example: |
You commenced business on 1 October
2012 and your first account will be closed on 30 June 2013.
No accounts will be prepared during the year ended 31 March
2013 and there will be no assessable profits for the year
of assessment 2012/13. | |
- However, if you closed your first accounts on or before
31 March 2013 and you have assessable profits, you will
have to pay Profits Tax or Provisional Profits Tax on those
assessable profits. Further, you have to consider if you
need to report for chargeability. See Notification
of Chargeability for details.
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| 2. |
Cessation of business during the
year 2012/13 |
- You should notify us in writing of the cessation of your business
within 1 month.
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| Example: |
Your business ceased on 20 April
2013.
You should inform us on or before 19 May 2013. | |
- You should prepare a set of accounts from the last accounting
date to the date of cessation and declare the assessable
profits/(adjusted losses) in the tax return for 2012/13.
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| Example: |
Your last accounting was prepared
up to 31 December 2011 and your business ceased on 28 February
2013.
You should prepare cessation accounts covering the period
from 1 January 2012 to 28 February 2013, declare the assessable
profits/(adjusted losses) in the tax return for 2012/13 and
retain the business records for at least 7 years. | |
- You should submit IR56F 1 month prior to the cessation
of employment of your employees. See Employers
for details.
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Deceased / Bankruptcy Cases
| 1. | Deceased Cases |
| Example: |
Peter, the proprietor has filed
tax returns annually for many years. He died during the year
2012/13. |
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- Peter's business should be regarded as ceased on the date
of his death.
- The executor should prepare accounts from the last accounting
date up to date of death and declare the assessable profits/(adjusted
losses) in the tax return for 2012/13.
- The executor should retain the business records for at
least 7 years.
- Where there is a successor to the business, the successor
will be treated as a new proprietor operating a new business
by the same business name. The new proprietor must make
a new business registration promptly.
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| 2. | Bankruptcy Cases |
| Example: |
Mary, the proprietress went
bankrupt during the year 2012/13. |
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- Mary is still required to report the assessable profits/(adjusted
losses) of her sole proprietorship business in her BIR60
until, if applicable, the business is ceased/sold.
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