What is the Auto-Inclusion Scheme (AIS) and how to Simplify your tax filing process for employees with AIS
The Auto-Inclusion Scheme (AIS) is a key initiative by the Inland Revenue Authority of Singapore (IRAS) designed to simplify the tax reporting process for employers and employees. Since the Year of Assessment (YA) 2021, it has been mandatory for employers with five or more employees, as well as those who receive the “Notice to File Employment Income of Employees Electronically under the AIS.”
Failure to comply with AIS regulations may result in fines of up to $1,000 under Section 94 of the Income Tax Act. This article explores what AIS is, why it is essential for businesses, and how it benefits both employers and employees.
What is the Auto-Inclusion Scheme (AIS)?
The Auto-Inclusion Scheme (AIS) is an electronic tax reporting system that requires employers to submit their employees’ income information to IRAS. This information is then pre-filled in employees’ income tax returns, making tax filing more efficient and accurate.
How AIS Works
For Employers:
- Register for AIS: Employers can register via the myTax portal.
- Prepare Data: Employers need to gather employees’ income details.
- Submit Data: Employers must submit employment income details using AIS-compatible software between 6 January and 1 March each year. Early submission is recommended to avoid last-minute congestion.
- No Hardcopy IR8A: Employers no longer need to issue hardcopy IR8A forms to employees, reducing paperwork.
- Notify Employees: Employees should be informed to check their tax filings after the submission.
For Employees:
- Automated Inclusion: Their employment income details are automatically included in tax assessments.
- Verify Accuracy: Employees can review and report any discrepancies to IRAS.
- Simplified Filing: AIS reduces manual tax filing efforts, minimizing errors.
Who Must Comply with AIS?
From YA 2024, employers must participate in AIS if they:
• Have five or more employees, including:
- Full-time and part-time resident employees
- Non-resident employees (including those overseas but providing services in Singapore)
- Company directors, including non-residents
- Board members receiving fees
- Pensioners
- Former employees who received income within the reporting year (e.g., stock option gains)
• Receive a Notice to File Employment Income of Employees Electronically under the AIS from IRAS.
Employers with fewer than five employees are encouraged to voluntarily adopt AIS for greater efficiency.
AIS Registration
There are 3 ways to register for the AIS at myTax Portal:
Benefits of AIS for Employers and Employees
For Employers:
Simplified Tax Reporting – Automates income submission to IRAS. No Hardcopy Forms – Reduces paperwork and promotes sustainability. Reduces Errors – Ensures accurate tax reporting with fewer discrepancies. Smoother Payroll Processing – Aligns with payroll systems for efficient tax reporting.
For Employees:
Pre-filled Tax Returns – Saves time and effort in tax filing. Fewer Mistakes – Minimizes manual errors in tax reporting. Quicker Processing – Reduces the need for additional documentation or amendments.
Frequently Asked Questions (FAQ)
No, AIS is mandatory for employers with five or more employees or those who receive a notice from IRAS. However, smaller businesses are encouraged to adopt AIS for better efficiency.
Non-compliance can result in fines of up to $1,000 under Section 94 of the Income Tax Act.
Late submissions may result in penalties. Employers are advised to submit before the deadline (1 March) to avoid potential fines and compliance issues.
Employees can check their pre-filled income tax return on the IRAS website and report any discrepancies to their employer or IRAS.
No, AIS eliminates the need for hardcopy IR8A forms, as the details are directly submitted to IRAS.
Employers can register for AIS via the myTax portal on the IRAS website.
Conclusion
The Auto-Inclusion Scheme (AIS) is a vital initiative that streamlines tax compliance for businesses in Singapore. Employers benefit from reduced administrative burden, while employees enjoy a hassle-free tax filing experience. Compliance with AIS ensures accuracy, efficiency, and sustainability, making it an essential requirement for businesses.
Need help managing your tax compliance? Let our experts at Think SME handle it for you. Contact us today to ensure seamless AIS reporting for your business!
