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Sole Proprietorship - How to complete
Part 5 of B.I.R. 60
| 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 (B.I.R. 60). |
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| 2. | How to Complete the Boxes in Part 5 of B.I.R. 60 |
| (a) | Put a 'tick' in the 'Yes' Box in the second line
of Part 5 of B.I.R. 60 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 B.I.R. 60
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 $500,000.
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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.
The maximum amount of deduction allowable to you is $12,000 per year.
If you have claimed deduction for contributions to recognized retirement scheme under
Salaries Tax (Part 4.3 of B.I.R. 60), your claim under Part 5 for Profits Tax should be limited to the balance.
For example, if you have claimed deduction of $8,400 under Salaries Tax (Box 33, Part 4 of B.I.R. 60),
the maximum amount of deduction you may claim under Profits Tax (Box 42, Part 5 of B.I.R. 60) will be $3,600.
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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 6 of the Appendix
to B.I.R. 60. |
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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 B.I.R. 60.
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| (l) | What if I have a business to report
but Part 5 of B.I.R. 60 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 B.I.R. 60 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 B.I.R. 60 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 $500,000) |
| - So long as the gross income of your sole proprietorship business does not
exceed $500,000, 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 B.I.R. 60 and
other matters relating to the completion and filing of B.I.R. 60, see |
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Partnership - How to complete B.I.R. 52
| 1. | Where a business is not solely owned by you
for the full year, you should not report it in Part 5 of B.I.R. 60. Rather, you should report on the Profits Tax
Return (B.I.R. 52) for that business. |
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| 2. | How to Complete B.I.R. 52 See |
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Sole Proprietorship changed to Partnership or vice versa
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| 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 (B.I.R. 52) 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 (B.I.R. 52) 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 B.I.R. 60. |
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| 5. | The profits for the year of change
(whole year) should be reported in B.I.R. 52 issued in the name of the partnership business. |
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Commencement / Cessation of Business
| 1. |
Commencement of Business during
the year 2007/08 |
- If you closed your first accounts after 31 March 2008,
probably there would be no assessable profits for the year
of assessment 2007/08.
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| Example: |
You commenced business on 1 October
2007 and your first account will be closed on 30 June 2008.
No accounts will be prepared during the year ended 31 March
2008 and there will be no assessable profits for the year
of assessment 2007/08. | |
- However, if you closed your first accounts on or before
31 March 2008 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 2007/08 |
- 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
2008.
You should inform us on or before 19 May 2008. | |
- 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 2007/08.
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| Example: |
Your last accounting was prepared
up to 31 December 2006 and your business ceased on 28 February
2008.
You should prepare cessation accounts covering the period
from 1 January 2007 to 28 February 2008, declare the assessable
profits/(adjusted losses) in the tax return for 2007/08 and
retain the business records for at least 7 years. | |
- You should submit I.R. 56F 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
2007/08. |
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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 2007/08.
- 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 2007/08. |
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- Mary is still required to report the assessable profits/(adjusted losses) of her sole proprietorship
business in her B.I.R. 60 until, if applicable, the business is ceased/sold.
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