Understanding Singapore’s Auto-Inclusion Scheme (AIS) and Its Significance for Business Owners

The Auto-Inclusion Scheme (AIS) has become an integral part of Singapore’s tax system, especially for employers. Since the Year of Assessment (YA) 2021, it is mandatory for employers with five or more employees or those who have received the “Notice to File Employment Income Of Employees Electronically under the AIS.”

Failure to comply can result in fines of up to $1,000 under Section 94 of the Income Tax Act. In this article, we will delve into what AIS is, why it is crucial for employers, and how it benefits both businesses and employees.

What is Auto-Inclusion Scheme (AIS)?

Auto-Inclusion Scheme (AIS) is a tax scheme administered by the Internal Revenue Authority of Singapore (IRAS). It requires employers to submit their employees’ employment income information electronically. This information is then automatically included in the employees’ income tax assessments, simplifying the tax filing process.

Here’s a step-by-step overview of how AIS works:

For Employers:

1. Registration: Employers can register for AIS via the myTax portal.
2. Data Preparation: Employers need to prepare their employees’ employment income information.
3. Submission: The information is submitted using AIS software from 6 Jan to 1 Mar each year, with a strong recommendation to submit early to avoid peak-period congestion.
4. No Hardcopy IR8A: AIS eliminates the need to issue hardcopy IR8A (Return of Employee’s Remuneration) and supporting forms to employees, promoting environmental sustainability.
5. Employee Notification: Employers inform employees to file their income tax returns if they have received a notification from IRAS.

For Employees:

1. Automated Inclusion: Employees’ employment income information is automatically included in their income tax assessments.
2. Verification: Employees verify the information and highlight any discrepancies if necessary.
3. Simplified Filing: The AIS streamlines the tax filing process, making it easier and more accurate for employees.

Who Needs to Comply with AIS?

Note: Employers who have less than 5 employees are encouraged to join the AIS. Employers can register here.

Types of Employment Income Information for AIS Submission

AIS submission comprises four main forms:

1. Form IR8A: This mandatory form contains details of employee income and employment and must be prepared and communicated to all employees.
2. Form IR8S: This supporting form contains details of excess or voluntary CPF contributions by the employer and refunds from CPF board, to be submitted when applicable.
3. Appendix 8A: This supporting form contains details of benefits-in-kind, such as housing and accommodation benefits, car benefits, etc., to be submitted when applicable.
4. Appendix 8B: This supporting form contains details of gains from stock option programs (ESOP) or any other form of share ownership compensation (ESOW), to be submitted when applicable.

Benefits of AIS for Employers and Employees

1. Streamlined Filing: AIS simplifies the tax filing process for employees, reducing errors and ensuring accurate tax returns.
2. No Hardcopy Issuance: Employers eliminate the need for hardcopy IR8As and supporting forms, promoting sustainability.
3. Automatic Information Population: Employees benefit from pre-populated tax forms, reducing manual data entry.
4. Easier Amendments: AIS allows for easier changes to specific line items on original tax return submissions.

Summary

The Auto-Inclusion Scheme (AIS) is a mandatory tax scheme that significantly eases the process of filing income tax in Singapore for both employers and employees. It eliminates manual data entry, reduces errors, and promotes environmental sustainability. Employers should comply with AIS regulations to avoid fines and contribute to a smoother tax filing experience for their workforce.

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