A sole proprietorship does not pay tax separately. Its profit is your personal income, taxed at the resident progressive rates alongside any salary, rental or other income you have, after personal reliefs. You declare it each year in your individual income tax return (Form B, or the form IRAS issues to you), e-filed on myTax Portal between 1 March and 18 April. If revenue is S$200,000 or less, you report revenue and adjusted profit in a 2-line statement. If your net trade income is above S$6,000 and you are a Singapore Citizen or PR, compulsory MediSave contributions also follow.
Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.
This guide is for sole proprietors and other self-employed people, such as consultants, tutors, designers and contractors, who want to file correctly and know what IRAS expects.
Do I have to file a tax return for my business?
IRAS expects you to file if, in the previous calendar year, your total annual income was above S$22,000, or your net profit from self-employment was above S$6,000, or you were a non-resident who derived income from Singapore. If IRAS has sent you a filing notice, you must file even if your income is below these levels.
Tax works on a preceding-year basis. Profit earned from January to December 2026 is declared in the return for YA 2027, filed in March and April 2027.
How is my business profit calculated?
IRAS works from three figures:
- Revenue: all gross income of the business, such as fees and sales proceeds.
- Gross profit: revenue less the cost of goods sold, if you sell goods.
- Adjusted profit or loss: gross profit less allowable business expenses and capital allowances.
Expenses are deductible only if they are incurred wholly and exclusively to earn your business income. IRAS states that personal, private and capital expenses are not allowable business expenses.
| Usually deductible | Usually not deductible |
|---|---|
| Materials and stock you resell | Your own drawings or “salary” to yourself |
| Salaries and CPF for employees you hire | Your own MediSave contributions (these are handled as a personal relief instead) |
| Rent for business premises | Household rent and utilities, except a proven business portion |
| Software subscriptions, professional fees and advertising | Personal travel, meals and clothing |
| Business insurance and bank charges | The cost of buying equipment, which is claimed through capital allowances instead |
| Interest on a loan used for the business | Income tax itself and penalties |
Where an item is used for both business and private purposes, such as a phone plan, claim only the business portion and keep a note of how you worked it out.
Capital allowances on equipment
If you buy a laptop, machinery or other equipment for the business, you do not deduct the purchase price as an expense. You claim capital allowances over the asset’s prescribed period, or over a shorter period where the law allows. The rules are the same ones companies use, explained in our guide to capital allowances under sections 19 and 19A.
What do I actually declare in the return?
| Annual revenue | What you report |
|---|---|
| S$200,000 or less | 2-line statement: revenue and adjusted profit or loss |
| More than S$200,000 | 4-line statement: revenue, gross profit or loss, allowable deductions, and adjusted profit or loss |
| S$500,000 or more | A certified statement of accounts, signed by you, uploaded with the return, in addition to the line statement |
The short statement does not mean you can keep short records. You still need full accounts behind the figures, and IRAS can ask for them.
Can a business loss reduce my other tax?
Yes. This is one of the real differences between a sole proprietorship and a company. If your business makes a loss after expenses and capital allowances, IRAS lets you set the loss against your other income in the same year, such as employment income, rental or interest, and income from your other businesses.
Any loss left over can be carried forward to later years until it is used up. Unused capital allowances can also be carried forward if you are still carrying on the same business. If the business ceases, unabsorbed trade losses can still be carried forward, but unabsorbed capital allowances cannot. IRAS also offers a carry-back relief that lets you set current-year losses and capital allowances against the income of the immediately preceding YA, subject to a cap of S$100,000 and an election made with your return.
Example: Mei, a hypothetical designer, has a salary of S$70,000 from a part-time job and starts a design studio as a sole proprietor in 2026. The studio’s first-year adjusted loss is S$12,000 after capital allowances on her equipment. In YA 2027 she can set the S$12,000 loss against her salary, so her assessable income falls to S$58,000 before personal reliefs. If her studio had been a company, the loss would have stayed inside the company.
How much tax will I pay?
Your adjusted profit is added to your other income. After personal reliefs, the total is taxed at the resident progressive rates, which start at 0% on the first S$20,000 of chargeable income and rise in bands to 24% on chargeable income above S$1 million. As a self-employed person you may also claim earned income relief and relief for your compulsory MediSave contributions, within the overall relief cap. The rates and reliefs are set out in our personal income tax guide.
A sole proprietor does not file Estimated Chargeable Income or a corporate tax return. Those are company obligations. You receive one Notice of Assessment for all your income, and you can usually pay by GIRO instalments.
What is compulsory MediSave and when does it apply?
If you are a Singapore Citizen or Permanent Resident and your annual net trade income is more than S$6,000, you must make MediSave contributions. After IRAS assesses your income, the CPF Board sends you a Notice of CPF Contributions for Self-employed Persons, and the amount must be paid within 30 days of the notice. The rate depends on your age and net trade income, subject to a cap, and the CPF Board’s calculator shows the current figures. Our guide to MediSave contributions for self-employed persons explains the payment options.
Unlike an employee, you do not pay ordinary CPF on your own business income. You can make voluntary contributions to your CPF accounts if you want to build retirement savings.
What other obligations come with the business?
Record keeping
IRAS requires you to keep full and accurate records and accounts of all business transactions from the start of the business, and to retain them for at least five years. That includes invoices issued, receipts for expenses, bank statements, and a fixed asset list for capital allowances.
GST registration
GST registration becomes compulsory when taxable turnover exceeds S$1 million at the end of a calendar year, or is expected to exceed S$1 million in the next 12 months. For a sole proprietor, IRAS combines the turnover of all your sole proprietorships and your other trade, profession or vocation income, because the registration is in your own name. See how to apply for GST registration if you are getting close.
Filing step by step
- Close your books for the calendar year and reconcile them to your business bank account.
- Separate personal spending from business expenses, and work out the business portion of shared costs.
- Update your fixed asset list and calculate capital allowances.
- Calculate revenue, gross profit and adjusted profit or loss.
- Log in to myTax Portal with Singpass between 1 March and 18 April and complete the self-employed income section, using the 2-line or 4-line statement as appropriate.
- Upload a certified statement of accounts if revenue is S$500,000 or more.
- Declare your other income and claim the reliefs you are entitled to.
- When the Notice of Assessment and any CPF Board MediSave notice arrive, check the figures and pay on time.
Documents checklist
- Sales invoices and receipts from customers or platforms
- Supplier invoices and expense receipts
- Business bank statements for the full year
- Fixed asset register with purchase invoices
- Payroll and CPF records for any employees
- Records of loans used for the business and interest paid
- Your working for any business-use percentage on shared items
When does incorporating start to make sense?
Because sole proprietorship profit is taxed at your personal rates, the tax gap with a company widens as profit grows, and you remain personally liable for the business’s debts. A company pays tax at its own rate, has its own filing obligations, and keeps losses inside the company. The decision involves liability, cost and administration as well as tax. Our guide to converting a sole proprietorship to a Pte Ltd walks through the comparison and the steps.
Frequently asked questions
I have a full-time job and a side business. Do I file separately?
No. You file one return. Your employment income is usually pre-filled from your employer’s records, and you add the self-employed income in the same return.
Can I pay myself a salary from my sole proprietorship to reduce tax?
No. A sole proprietorship is not a separate person, so money you take out is drawings, not a deductible expense. Your tax is based on the business profit before drawings.
What if I did not keep receipts for some expenses?
IRAS can disallow expenses you cannot support. Reconstruct what you can from bank and card statements and supplier records, and set up a system so the gap does not recur. If you have under-declared income in a past year, speak to an adviser about correcting it.
My business made a loss. Do I still need to file?
Generally yes, if you meet the filing criteria or IRAS has asked you to file. Declaring the loss is also how you set it against your other income or carry it forward.
Does a partnership work the same way?
Broadly. The partnership files its own return of divisible profit, and each partner declares their share of the profit or loss, plus any partner’s salary, in their own individual return.
Need help with your sole proprietor tax return?
If you run a sole proprietorship or work for yourself and want your accounts and return prepared properly, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133. We can keep your books, calculate your adjusted profit and capital allowances, prepare the figures for your Form B, and help you decide whether and when to move the business into a company.
Kevin Yeo, Raffles Corporate Services