Singapore Corporate Taxes 102: Auto Inclusion Scheme

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Our Singapore Corporate Tax lessons are back! (I know what you’re thinking… nothing says exciting like taxes). This time we’ll be talking about how employers in Singapore should handle tax forms for their employees. The IRAS is trying to digitize the entire system by introducing the Auto Inclusion Scheme this year and linking it to CPF contributions. In short, filing tax returns is going to be a smoother, more integrated process.

Under the Income Tax Act, there are four forms that employers should be aware of:

  1. Form IR8A: This is to declare income of all employees
  2. Appendix 8A: This form should be completes if the employee is provided with benefits-in-kind unless these benefits are exempted from Income Tax
  3. Appendix 8B: If the employee has benefited from any Share Ownership Plans, then this needs to be completed
  4. Form IR 8S: Must be completed if excess CPF contributions are made by the employer.

Explanatory notes on each form are here. Income tax returns must be filed for the following people:

  1. Full time resident employees
  2. Part time resident employees
  3. Non-resident employees
  4. Company director (including a non-resident director)
  5. Pensioner and
  6. Employees who have left the organisation within the financial year

For your reference, here are the tax rates for different income brackets:

Taxable Income Bracket Total tax on income below bracket Tax rate on income in bracket
0-20,000 0 0
20,001-30,000 0 2
30,001-40,000 200 3.5
40,001-80,000 550 7
80,001-120,000 3,350 11.5
120,001-160,000 7,950 15
160,001-200,000 13,950 17
200,001-320,000 20,750 18
>320,001 42,350 20

The Auto Inclusion Scheme is a system for recording employee income and tax related information for companies with 12 or more employees for the entire year, ending 31 December 2014. Companies have to submit employee information to IRAS electronically by March 1st of every year, starting from 2015. This way, companies do not need to distribute hard copies of the above forms for employees to file their income tax returns.

If employers use payroll software to generate payroll, then the software can be used to submit files to AIS using another (free) software provided by the IRAS called the Validation and Submission Application. The payroll software should meet the IRAS file format specifications in order to submit forms. The Validation and Submission Application software can be downloaded here.

Once every employee’s details are filled in through AIS, companies should inform their employees to file their tax returns through the myTaxPortal. Employees no longer need to fill in their income and details from the four forms above because the AIS system already has it stored.

Employers who have fewer than 12 employees are also encouraged to use the AIS by filling out this form and emailing it to ais@iras.gov.sg. After submitting the form, companies will also have to go through a trial exercise before joining the AIS.

The AIS system can be linked to CPF Data in order to fill up Form IR 8S easily. The system makes for smooth functionality across the IRAS and CPF platforms. To sign up for the AIS and CPF Data Link-up Service from 2016, this application form must be filled. For existing AIS members who want to use the CPF Data Link-Up Service, this application form must be filled.

Hope this helps! If you want to know how to pay up CPF contributions, we’ve got you covered. More on Tax Clearance and CPF contributions later.

Disclaimer: As always, consult your lawyer or accountant for advice! We are here to help, but your specific situation should be reviewed by a professional with complete knowledge of your situation. 

The Employer’s Guide to Singapore Work Visas

https://www.youtube.com/watch?v=SjkXCsMXY-0&feature=youtu.be&rel=0

This video provides an introduction to hiring foreign workers in Singapore- types of visas available to the employee according to skill level, application criteria and levies due to the employer. More information is available on the Ministry of Manpower website

After you have incorporated your business in Singapore, you will need to hire employees, both local or foreign to work for your company. If you are employing non-resident employees in Singapore, as an employer you have to make sure that they hold a valid work pass (also known as work visa).

Professional Work Visa

Pass type

Who is it for

Employment Pass

For foreign professionals, managers and executives. Candidates need to earn at least S$3,300 a month and have acceptable qualifications.

EntrePass

For eligible foreign entrepreneurs wanting to start and operate a new business in Singapore.

Personalised Employment Pass

For high-earning existing Employment Pass holders or overseas foreign professionals. The PEP offers greater flexibility than an Employment Pass.
 Skilled or Semi- Skilled Workers
Pass type Who is it for

S Pass

For mid-level skilled staff. Candidates need to earn at least S$2,200 a month and meet the assessment criteria.

Work Permit for foreign worker

For semi-skilled foreign workers in the construction, manufacturing, marine, process or services sector.

The Foreign Worker Levy

singapore work passesIt is important to note that Singapore companies are required to pay Foreign Worker Levy (FWL) for the Work Pass and S Pass holders. This levy is imposed by the Singapore Government to regulate foreign workers numbers in the country.

The amount of levy due to the employer is determined by the sector the company belongs to and the educational level and skills of the employees. Employing workers with relevant qualifications and skill-based test certificates will count towards your skilled workers, which will entitle you to a concession in the worker’s levy.

Look at this example on the FWL scheme for manufacturing and service sectors. 


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