Accounting And Compliance For An E-Commerce Business In Singapore

With no end in sight for the pandemic in Singapore, many businesses are looking into e-Commerce. Recently a Singapore-based start up, Mdada, generated over 3 Million SGD in the span of 2 months this year. This article will cover what a successful e-commerce business should look into when it comes to accounting and compliance.

Accounting and bookkeeping strategies for an e-commerce business

Although proper accounting and bookkeeping are important for any business, it is extremely so for an e-commerce business. This is due to the 24/7 nature of e-Commerce businesses. In order to maintain an accurate record, there must be some form of bookkeeping system in place.

Inventory Management

It is easy to lose track of your inventory when there are multiple channels of sales in your business. Especially so when your online business gains virality. It is recommended that e-commerce businesses take advantage of accounting software with inventory management integrations. 

An example of accounting software is Xero. We highly advise that you outsource to a certified Xero partner such as ourselves to assist you in your e-commerce journey.

Transaction Tracking

Traditionally, businesses will have their transaction linked to a business bank account. As an e-commerce business owner, you will soon realize that your business bank account will be filled with a variety of transactions (sales, chargeback, shipping fees, etc…).

You can commonly find your transaction records on the back end of your selling platform. It is recommended that you cross check your transaction’s value/date/time on the selling platform and your business bank account.

In the situation where you do not intend to use a selling platform, we recommend hiring professional accountants to assist you in your bookkeeping.

Tax and Compliance for an e-commerce business

Knowing your tax liabilities is one of the problems of running an e-commerce firm. E-commerce transactions are frequently multi-jurisdictional and involve anonymous participants. You must be aware of the Singapore tax concerns that may develop as a result of conducting an e-commerce business.

Income Tax In Singapore

E-commerce business owners often have issues understanding tax issues regarding the residence, source and income classifications of transactions. It is difficult to apply the territorial basis of taxation principle, which Singapore follows, as e-commerce transactions are usually electronic borderless transactions.

A general rule of thumb is determining where the e-merchant is trading. Such as the place of contract or the place where operations relating to e-transactions are taking place.

However, there are several ambiguous situations regarding the source of the trade due to server and regional specifications. As such it is highly important to seek advice from a professional in regards to your tax compliance.

Find out more on the specifics of income tax in Singapore here.

Double Tax Treaties

Due to the nature of business, e-commerce owners might at times be tax residents in multiple jurisdictions. This will result in double taxation of income. Fortunately, relief can be found through Singapore’s Double Taxation Agreement (DTA).

If you are a tax resident of a foreign country you can click this link to find out whether there is a DTA signed with Singapore.

Want to know more about how Crystal Clear can assist your e-commerce business? Contact us to know more about how we can use Xero to transform your business to the next level.

Alternatively, book a meeting with us today by clicking on the button below.