Guide to the Auto Inclusion Scheme AIS

What is AIS?

The AIS is a tax scheme that applies in Singapore, especially for entrepreneurs. This scheme is legally enforceable and strictly administered by the Internal Revenue Authority of Singapore (IRAS). AIS enables companies to more easily communicate their employees' earnings information digitally.

The purpose of this scheme is to make it easier to calculate income tax for employees in Singapore by entering the information provided by the company or employer through AIS automatically when they are preparing their income tax returns. AIS also intends to make the burden of filing annual tax returns easier. Furthermore, the AIS registration process is available online via the myTax IRAS website.

Who needs to be enrolled in AIS and why is AIS compulsory for Singapore companies? 

Participation in AIS is compulsory for employers with 5 or more employees. It is gazetted under S68(2) of the Income Tax Act.

AIS applies to the majority of employees, including:

• Full-time resident employees
• Part-time resident employees
• Non-resident employees, including those who are based overseas and are required to provide services in Singapore during the year
• Directors including non-resident directors
• Board members receiving board or committee member fees
• Employees who have left the organisation, but have received income in the reporting year (for example, stock option gains)
• Salaried partners of a partnership or LLP

Voluntary AIS participation

Other employers who have less than 5 employees are urged to sign up for AIS on their own initiative. Please keep in mind that the employee count is based on the total number of unique employees/employees throughout the year. For example, if you recruit an employee during the calendar year 2022 and he or she departs after one month, you will still be recognised as having one employee for the year.

This is especially significant if the firm has more than six employees. For the purposes of AIS registration, the word "employee" includes all directors and anybody with whom you must submit Form IR8A (Refund of Employee Remuneration) or Form IR21 (Notice of termination of employment or departure of a non-Singaporean employee from Singapore).

This scheme is key for employers in Singapore, making it easier for employees to file their income tax in Singapore as their employment income information is entered automatically. In addition, in the future, employees will also benefit from a non-filing service (NFS) if the company submits income tax information through AIS.

In addition, if the company does not comply with AIS, the company can be subject to a fine of up to SG$5,000 for late AIS submission, which could be detrimental to the company as a whole. AIS is a mandate from the state, so as a company that complies with state regulations, you should comply with these rules for the sake of your business continuity in the future. Even companies with eight or more employees who have not been notified by IRAS need to contact the Authority themselves. 

Benefits of AIS

Given the huge role AIS plays in simplifying the taxation process in Singapore, this provides sustainable benefits for both employees and the company. These benefits include:

• Streamlining the process of filing income tax in Singapore for employees;
• Improving the accuracy of tax returns submitted by employees in Singapore and helping to reduce tax evasion;
• The fact that companies do not need to issue hardcopies of IR8As and supporting forms to employees;
• Automatic information population;
• The employee's employment information will be automatically populated when they file their tax returns (they do not need to enter the information submitted again. It also allows employees to verify information and highlight any discrepancies);
• Saving paper and being more sustainable;
• Being easier to make amendments; and
• The fact that the online filing process makes it easier to make changes to specific line items on original tax return submissions.

What information is needed for submission

If your company is going to register AIS, there are four types of forms that you must include. The first is mandatory, and the other three forms are supported. They are as follows:

• Form IR8A is a mandatory form that contains details of the employee's income and employment. This should be prepared and communicated to all employees.
• Form IR8S contains details of excess/voluntary CPF (Central Provident Fund) contributions by the employer and refunds from the CPF Board.
• Attachment 8A is a supporting form that contains details of benefits in kind, such as Housing and Accommodation Benefits, Car Benefits, etc.
• Appendix 8B details the advantages or benefits of stock options from either an Employee Stock Option Plan (ESOP) or other forms of an Employee Stock Ownership (ESOW).