Singapore practises annual tax filing (instead of monthly) for income earned during a calendar year i.e. 1 Jan to 31 Dec. Employers have to report the payments made to their employees through the IR8A form (download form).
Who must the form be prepared for?
(a) Full-time resident employee;
(b) Part-time resident employee;
(c) Non-resident employee;
(d) Company director (including a non-resident director)
Tax residents refer to Singapore Citizens, Permanent Residents and foreigners who have worked for 183 days or more.
When do I need to complete the form?
The IR8A form needs to be printed out, individually completed and given to each employee by 1 March of the following year. Alternatively, employers may prefer the Auto-Inclusion Scheme (AIS) for convenience.
What is the Auto-Inclusion Scheme (AIS)?
An Auto-Inclusion Scheme (AIS) for employment income is available for employers to electronically submit the IR8A information to the tax authority (IRAS). It allows employers to declare the lump sum amounts with less effort compared to completing the hardcopy IR8A form. Employees also benefit from having the information directly updated on their tax portal versus manually updating it themselves.
As of 2015, participating in AIS is mandatory for employers with 11 or more employees (more information on participation).
Completing the Form IR8A
(Our example is for the year ended 31 Dec 2015)
To begin with, you need to input basic employment details as shown in the fields below.
Next, the form groups employment income into 4 types. Most types of income are taxable unless there is a specific exemption. This includes all benefits that are paid or granted in money or otherwise (find out what is taxable).
Gross salary, fees, leave pay, wages and overtime pay
Most basic payments fall under this type of income with the exception of allowances and commission which fall under Others. Just a note to exclude NSmen Pay paid directly to employees by Mindef, Singapore Civil Defence Force or Singapore Police Force. Only report the amount If the NSmen pay was reimbursed to the company.
Is assessed in the year an employee becomes entitled to the bonus.
Are assessed in the year a director becomes entitled to the fees. If the fees are approved in arrears, entitlement is on the date the fees are voted and approved at the company’s AGM/ EGM. If approved in advance, entitlement is as and when services are rendered for the year e.g. entitlement can be monthly if payment of director’s fees is on a monthly basis.
Other types of income
This is where less common types of payments such as payments arising from resignation, voluntary CPF contribution and employee stock options can be reported. I’ll elaborate on the more typical types down the list:
Allowances (iii) others generally refers to all kinds of allowances. This is also where some exceptional payments other than allowances can be declared:
- Cash top-up to Retirement Sum Topping-up Scheme by employer
- Staff referral fees
- Annuity purchased for employee in lieu of any pension or other benefit
Lump sum payments here typically refer to retrenchment & retirement benefits. Just note that compensation for loss of office is not taxable and should not include taxable components such as gratuity, notice pay, ex-gratia payment, etc.
Excess/voluntary contribution to CPF by employer is taxable. Such contributions are defined as
- higher than the compulsory CPF rate for each age group of employees
- in excess of the cap on monthly Ordinary Wages (OW) and total Additional Wages (AW). More information on OW & AW.
- Contributions made by employer for foreign employees or on director’s fees
Gains or profits from Employee Stock Option (ESOP)/other forms of Employee Share Ownership (ESOW) Plans derived by the employee from the exercise, assignment, release or acquisition of any right or benefit OR grant or vesting of any shares under an ESOW Plan is taxable. This needs to be declared in the Appendix 8B. (Explanatory notes on Appendix 8B)
Value of Benefits-in-kind
For more information on examples of Benefits-in-kind where the value needs to be reported, you may like to refer to the Appendix 8A. Such benefits are typically provided separately from income. (See benefits-in-kind exempt from income tax)
Just to recap, once the form is completed, signed off and sent to each employee, your obligation as an employer is done. For AIS submission, the last step is to enter the information above as a batch on the IRAS portal.
What if changes need to be made after submission?
If there are any changes to be made to your employee’s income or deductions information after electronic submission, submit only the difference in amount for the affected employee and not an overall revised value (see details).
If you’re not on AIS and your employee has submitted the form:
you need to complete another form with the correct amount and indicate
(i) “Additional” to report the additional income paid to the employee; or
(ii) “Revised” to report the entire income/deduction details.
Revised Form IR8A will supersede all previous Form IR8A. You must give the Additional/Revised Form IR8A to your employee for re-submission to IRAS.
A good Payroll software automates IR8A reporting
There are a number of important features to look out for in a Payroll software. The ability to compile the relevant income for the year to automatically fill the IR8A form for employees is a huge plus.
Employers will save time and effort not having to manually sum up 12 months worth of payroll details, without worry of information being reported incorrectly on the form.
Another less obvious benefit is when the system ‘remembers’ to prepare the form for employees who ceased employment before the year ended. It’s all too easy to overlook this obligation especially if turnover is significant.
This guide serves to to simplify the IR8A exercise for employers participating in it for the first time. Whereas adopting a good payroll software simplifies the exercise year after year.
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