IRAS' Auto-Inclusion Scheme requires employers to submit employees’ employment income information to the IRAS electronically. Is your business affected and are your processes ready for it? 

Singapore, a nation where 96% of taxpayers (both individuals and businesses) file their tax returns on time, is constantly looking to streamline its tax system to make it even more efficient.

One of the ways it does this is through the Auto-Inclusion Scheme (AIS) for businesses, which requires employers to provide the IRAS (Inland Revenue Service of Singapore) with information about their employees’ income to make it easier for employees to file their tax each year.

Luckily, preparing for your AIS obligations is relatively simple.

The Auto-Inclusion Scheme

IRAS' AIS requires employers to submit employees’ employment income information to the IRAS electronically. The IRAS then includes this information automatically in the employees’ online tax returns and assessments.

The system has ongoing benefits for both the employer and the employee.

For the employee, it means that when he or she files their tax return, their employment income information has already been auto-included, making the exercise of submitting a tax return quicker and simpler. And it also means the employee may be eligible to use the No-Filing Service (NFS) in the future.

For the employer, it means you no longer have to issue hardcopy IR8A and supporting forms to employees – just give them a statement of earnings or a copy of the IR8A for their reference.

Which of your employees must be included in the AIS

The AIS applies to most employees, including:

• Full-time resident employees
• Part-time resident employees
• Non-resident employees
• Company directors, including the non-resident directors
• Board Members receiving Board or Committee Member Fees
• Pensioners
• Employees who have left the organisation but were in receipt of income in the reporting year.

As Sole Proprietors and Partners are owners of their own businesses, the salaries drawn down from the businesses are taxable as trade income. The income information of these sole proprietors and partners should be excluded from your submission.

But the income information of partners who are engaged under an employment contract with the partnership should be included in your submission, because they are considered to be employees of the partnership.

Is your business subject to the Auto-Inclusion Scheme?

From the Year of Assessment (YA) 2019 onwards, joining the AIS is compulsory for employers with eight (8) or more employees. In fact, the IRAS also encourages employers with fewer than eight employees to sign up for the AIS. Employers who have received the "Notice to File Employment Income of Employees Electronically under the Auto-Inclusion Scheme (AIS)" must also sign up for the scheme.

Employers with eight or more employees who have not been notified by the IRAS need to contact the Authority themselves. Failure to comply with AIS could result in fines of up to $1,000.

What employers need to submit for AIS

There are four types of forms to be submitted, one is mandatory and the other three are supporting:

• Form IR8A is a mandatory form that contains details of the employee and employment income. This must be prepared and submitted for all employees

The remaining three are supporting forms that only need to be submitted where applicable

• Form IR8S contains details of excess/voluntary CPF (Central Provident Fund) contribution by employer and refund from CPF Board
• Appendix 8A is the supporting form that contains the details of benefits in kind such as Housing and Accommodation Benefits, Car Benefits etc
• Appendix 8B contains details of share option gains or benefits from either Employee Stock Option (ESOP) Plans or other forms of Employee Share Ownership (ESOW) Plans.

How to submit

The IRAS advises that employers should look at the AIS submission process as a simple three-step exercise:

1. Authorise someone to submit the information electronically
2. Choose a suitable AIS software
3. Submit the employment income information electronically.

Choosing a suitable software

When choosing a payroll software to support your AIS submission, ensure the software is able to:

• Generate TXT/ XML files in the required format and can be submitted using the Validation and Submission Application, and/ or
• Integrate directly with IRAS' server to submit employment income information through Application Programming Interface (API).

You need to ensure the software can create and generate the appropriate files to comply with IRAS requirements.

Check out the list of supporting payroll vendors

If you want to make sure your software choice has been tested and verified by the IRAS, go to their list of supporting payroll vendors.

Singtel’s Essentials Payslip is now a supporting software listed on the IRAS website under the AIS for YA 2019.

Essentials Payslip has been developed to digitalise payslips so they can be accessed via the internet from computer or mobile device using a secure login, with the add-on option of sending password-protected payslips through email. The software allows you to create, host and maintain employee records and payslips in digital and printed formats, including unlimited payslip records and the ability to keep employment records and payslips for up to two years, even after the employee leaves the company. This will result in improved productivity and efficiency in meeting the IRAS requirements for the AIS process.

Many businesses in Singapore will be required to provide employee income information to the IRAS via the Auto-Inclusion Scheme (AIS) for the first time in YA 2019. Make sure you choose an IRAS tested and approved solution such as Singtel’s Essentials Payslip to make compliance simple and efficient.

At just $1 per employee per month, Essentials Payslip removes the manual task of generating itemised payslips and IR8A forms, and minimises human errors. Try it today.

Summary

• Any Singaporean small business with eight employees or more needs to sign up for the Auto-Inclusion Scheme
• AIS requires employers to submit employees’ employment income information to the IRAS electronically; this information is automatically added to the employees’ online tax returns and assessments
• Employers need to choose payroll software that can generate files that comply with IRAS requirements
• Essentials Payslips is compliant with IRAS requirements