What is Net Trade Income (NTI)?
Net Trade Income is defined as gross trade income minus all allowable business expenses, capital allowances and trade losses.
Net Trade Income = Gross Trade Income – allowable business expenses – capital allowances – trade losses
where Gross Trade Income = Total Revenue – Cost of Goods Sold (COGS)
How to calculate Net Trade Income (NTI)?
To calculate yearly Net Trade Income from 1 January 2022 to 31 December 2022, you will need to calculate
- Revenue: Total amount of sales you have made to your clients or customers in the year, regardless of whether you have received the money from the sales
- Cost of Goods Sold (COGS): The cost involved in producing the goods or services. If you are in F&B business, COGS refers to the raw materials you have bought to prepare the food in the year.
- Allowable business expenses: The expenses that your business has incurred and consumed within the year. For example, your business may have pre-paid for the expenses consumed in 2023 in the preceding year of 2022. However, your expenses should still be booked in 2023.
- Only expenses related to the business are allowed.
- Example of allowable expenses: Employee salary, rent and utility, accounting fee, advertising fee, business renewal fee, etc.
- Refer here for a full list of allowable and dis-allowable business expenses by the Inland Revenue Authority of Singapore (IRAS). Tax authorities of each country may have a different definition for allowable business expenses.
- Capital allowances: Some wear and tear of fixed assets may qualify for tax deductions. These tax deductions are known as capital allowances. Example: office furniture, electrical equipment, plant and machinery, etc.
- Trade losses: Losses that your business may have accumulated over the previous years that are carried forward to this year.
Read more: How to file income tax for self-employed person and partnership in Singapore