In this article
Long gone are the days when filing taxes was a tedious and lengthy process – what used to take hours can now be swiftly done online.
In order to allow employees in Singapore to file their employment income taxes more efficiently, the Internal Revenue Authority of Singapore (IRAS) introduced the Auto Inclusion Scheme (AIS).
What is the AIS?
The Auto Inclusion Scheme is a tax scheme in Singapore that is legally enforced by IRAS. It allows businesses to convey their employees’ earnings details more easily in digital form.
Its purpose is to make the process of determining employee income tax in Singapore easier by keying in information automatically when preparing for income tax returns.
What Are the Penalties for Errors in Tax Returns?
Why is important to file your employment income tax?
IRAS will enforce penalties against taxpayers who avoid paying their taxes and/or file the wrong tax returns.
The types of penalties served depend on whether there is evidence of invading taxes or not:
| With the Intention to Evade Taxes | Without the Intention to Evade Taxes |
| Penalty up to 400% of the amount of tax undercharged | Penalty up to 200% of the amount of tax undercharged |
| Fine up to S$50,000 | Fine up to S$5,000 |
| Imprisonment up to 5 years | Imprisonment up to 3 years |
What Do Employers Need to Know About the AIS?
In this article, we’ll look at how the AIS can be beneficial for your company. We will also discover how you can sign up for it if you haven’t done so already.
But before that, there are some things to note:
It’s Mandatory for Some Companies
Why must some companies join the AIS?
According to the IRAS, the AIS is compulsory for your company if:
- You have at 5 or more employees as of the Year of Assessment (YA) 2022, OR
- You have received a notice from the IRAS to file for the AIS
If you fall into either of these categories but haven’t signed up yet, now’s a good time to get the ball rolling.
We’ll tell you how you can do that later in the article, but first, take a look at what the AIS will mean for you and your business.
Electronic AIS Submission for Your Employees’ Employment Income Information
In case you’re new to this whole thing, the AIS essentially requires you to submit your employees’ employment income information to IRAS online.
When it’s time for your employees to file their tax returns, the information that you submitted earlier will automatically appear in their tax forms.
All that the employee needs to do is verify this information, and there will be no need for them to manually input anything else.
The information that you will submit to IRAS is derived from four main forms, namely:
- Form IR8A – total compensation received by employees, directors, board members, etc
- Appendix 8A – benefits-in-kind that your employees have received
- Appendix 8B – gains from stock option programs (ESOP) or any other form of share ownership compensation (ESOW)
- Form IR8S – only to be submitted if there are any excess CPF contributions made in the past to claim refunds
What Are the Employee Records That Must Be Submitted to the Auto Inclusion Scheme?
Employees that fall under these groups are applicable:
- Full-time resident employees
- Part-time resident employees
- Non-resident employees
- Directors (including non-resident directors)
- Board members getting fees
- Ex-employees that continue having income in the reporting year, like through stock option gains
- Partners engaged under an employment partnership
Fewer Errors Made During Tax Filing
Under the Income Tax Act 1947, it is an offence to declare wrong information when filing taxes, even if it was not done on purpose. The IRAS website states that those who submit incorrect details without an intention to evade taxes can face the following:
- Penalty of up to 200% of the amount of tax undercharged;
- A fine of up to $5,000; and/or
- Imprisonment of up to three years
With the AIS, the risk of errors is mitigated. This is because the amounts to be declared to by the employee will be auto-calculated by information provided by the employer.
Save Yourself the Hassle of Paperwork
Earlier, we listed the types of forms you’ll need to submit to IRAS – form IR8A being one of them.
Under the AIS, you will not need to submit a hardcopy of this form. Not only does this mean less paperwork for you, but you also get to go green by cutting down on unnecessary paper waste.
Considering the fact that form is mandatory, having only soft copies of it will benefit your company as well as the environment.
Your Employees Can Benefit From the No-Filing Service
For companies that use the AIS, their employees may be selected to utilise the No-Filing Service (NFS). This is a scheme that doesn’t require the taxpayers within it to file a tax return.
Instead, the IRAS will fully auto-fill the income tax form based on the details provided by employers.
Taxpayers in the NFS only need to submit a tax return if they want to make any adjustments to their income details or relief claims.
You can find out more about the NFS here.
How Can I Sign Up for the AIS?
As mentioned earlier, the AIS is compulsory for companies that have 5 or more employees, or those that have received a notice from the IRAS to sign up for it.
However, you are still encouraged to sign up even if you don’t fall in either category.
You can also get the process settled by authorising a professional to submit it electronically for you as an alternative.
Need a guiding hand? We’re here to help! At SCI, we have the expertise to assist you with taxation matters. Get in touch with us today.
FAQs
Let out tax experts help you with AIS!
Leave your AIS matters to our taxation professionals so that you can focus on other growth areas of your company.
