This is the time of the year when we find ourselves in the middle of tax season here in Singapore.
And this means one thing: It is time to file for income tax with IRAS.
Many of us are salaried employees and are used to not having to manually file for income tax due to the Auto-Inclusion Scheme (AIS) for Employment Income because employers will submit their employees’ employment income information to IRAS automatically.
However, today’s focus is going to be on something a little bit different.
The proliferation of side hustlers who have been creating alternative income (especially through online-based channels) has created a huge pool of self-employed citizens over the years.
If you think that you belong to this category, the most important question to ask yourself is this.
Have you been engaging in online activities for a profit, such as providing online content? Income earned may include advertising, blogging, subscriptions, commissions, etc.
If yes, then IRAS will thank you for contributing to the maintenance and improvement of our country’s public services and helping to promote the common good.
Indeed, IRAS even has a Twitter account too!
IRAS gave the following example: Daphne earns a commission whenever a customer buys a product that she promotes on her video channel.
She also earns advertising revenue from her video channel.
The commission income and advertising revenue earned through online affiliate marketing are taxable as trade income.
If Daphne’s total (1) annual net trade income exceeded $6,000 or her total (2) annual taxable income exceeded $22,000 last year, she will need to e-file a tax return by 18 April.
What is the key takeaway from this example?
The income earned from her online affiliate marketing should be reported under “Trade, Business, Profession or Vocation” in her individual income tax form.
To me, there are two simple rules:
Activities undertaken for profit are conducted repeatedly in an organised manner, like how a typical business is being runThe business operations supporting the online activities are based in Singapore even though the platform, such as Amazon, may be based overseas.
And what does this mean in layman’s terms?
Those juicy referral rewards for each sign-up from affiliate partners such as robo-advisors, online brokerages and digital banks would mean that we are considered commission agents if our activities are conducted repeatedly in an organised manner, like how a typical business is being conducted.
Increasingly, you will notice participating organisations (such as Endowus) that are submitting information to IRAS electronically for commission earners.
This should be viewed as good news, actually.
It means we don’t even have to lift a finger to do anything since everything is automatically captured for us!
This also means that if the respective affiliate partners aren’t submitting these data automatically, it is our duty to submit these tax returns.
The annoying thing is that most affiliate partners will not be able to provide any guidance on taxation matters and will ask you to clarify directly with IRAS.
If you are among the many taxpayers who have unknowingly forgotten to pay their taxes on trade income, you can be assured that this situation is more common than you think.
IRAS knows that taxpayers may occasionally make errors in their tax returns due to a lack of care or awareness of their tax obligations.
The IRAS Voluntary Disclosure Programme (VDP) encourages taxpayers who have made errors in their tax returns to come forward voluntarily in a timely manner to correct their errors.
Besides, IRAS is prepared to reduce penalties for voluntary disclosures which meet the qualifying conditions.
I love working with affiliate partners who are extremely considerate of the needs of content creators.
S-tier. Companies that are extraordinary would do things like providing monthly statements or even auto-filing income tax returns with IRAS. They are absolute gems, and I would consider them to be in the S-tier of affiliate partners. All the important information would be captured in an official document or invoice on a monthly basis, which would often be emailed to me.
A-tier. For the A-tier, they offer downloadable data on demand within their online platform or mobile application. I would have classified them as S-tier if not for one small issue: the possibility of them going bust, which would mean that the data previously available 24/7 would no longer be available.
B-tier. Let’s talk about the B-tier players. Well, they would send me an email for every affiliate compensation received, but often, there is nowhere else to obtain this information. This isn’t usually a problem since emails are forever these days, so it is as accurate as it can get, but tabulation is a little harder.
C-tier. The C-tier affiliate partners are where things start to get dicey. There is no way to obtain any sort of meaningful breakdown (by year) via their online platform, mobile application, or email history. While we can usually get past this problem with a friendly email to them, there are others (this big company in Singapore) who gave me the virtual finger by refusing to give me any consolidated data.
Regardless of who we are dealing with, the only protection that content creators can give themselves is proper record-keeping.
If there is a lesson to be had in dealing with affiliate partners who don’t give a damn about others, it would be to have good record-keeping practices.
Otherwise, you may want to check out this free resource bundle, which can newbie online sellers and digital creators who have zero idea what to do or where to start.
These simple templates will help to facilitate your tax filing process and make your life easier.
Even if you are new to managing an online business and completely ignorant of financial jargon, tax filing can be a breeze if you have the right tools at your disposal.
To be honest, I have been spending more time than I should trying to organize my tax affairs.
If record-keeping was painful for me, I figured it is probably the same for many people as well.
Simply tweak these templates (change the dates) to your own needs instead of starting from scratch.
Business RecordsStatement of AccountsBalance Sheet
I figured I would finally tidy up some templates and share them with all of you.
Hopefully, it will be of some help to you this tax season!
Download Tax Assistant and get your income tax in order today.
According to IRAS, the average rate of exchange to be used for purposes of tax assessment for any particular year, where the actual rate of conversion is not furnished, is the sum total of the end-of-month rates for the year divided by 12.
We can refer to the MAS website for historical exchange rate data.
None of the information found below is anything new and has been in effect for quite a number of years.
Perhaps these additional resources from IRAS can help to clarify any lingering doubts in your mind.
The usual disclaimer applies.
I do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
If you do have questions and wanna chat, just ping me in Telegram or Discord at any time.
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Kevin started Turtle Investor when his net worth languished at negative $25,755. His desire to turn things around led him to build passive income from investments and side hustles that pay for his daily expenses and vacations. You can learn more about Kevin here.
