Income Tax Singapore: HR Guide to IRAS Income Tax Rates
Posted on 28 April 2023 in Business | Suki Bajaj
Managing income tax submissions in Singapore is a complicated and time-consuming HR task. Any errors, oversights, and inconsistencies can lead to major problems such as heavy penalties which may disrupt the entire business operations. [1]
Here at QuickHR, we aim to help you save time and reduce errors when managing payroll processes. With an in-built CPF calculator, Bank GIRO and CPF submission features, QuickHR's holistic payroll management software in Singapore can help you overcome hectic payroll periods, no matter the number of pay runs you need!
To make it easier for HR professionals to handle the complex payroll processes and prevent possible financial damages, let us take you through our comprehensive guide to filing tax submissions.
Who Need to Pay IRAS Income Tax in Singapore
IRAS income tax applies to both Singapore tax resident and non-Singapore tax resident who earns and derives income in Singapore from the following sources:
- Employment (Salary or Bonuses)
- Trade, Business, Profession, or Vocation
- Property or Investments
- Other Sources (Royalties, Annuities, Winnings, or Estate or Trust Income)
What Are the Types of Employment Income and Benefits-in-kind That Are Taxable
- Salary, bonus, director's fee, commission and others
- Gains from the exercise of stock options
- Income received from overseas
- Pension
- Retirement benefits
- Retrenchment benefits
(These factors are to be computed by your employer)
Individuals working remotely from Singapore due to travel restrictions caused by the pandemic may refer to the COVID-19 Support Measures and Tax Guidance. [2]
How Much Individual Income Tax Do You Pay in Singapore?
All income earned in Singapore is taxable. The amount of income tax you need to pay depends on:
- 1. how much an employee earns in Singapore; and
- 2. whether the employee is a tax resident or non-resident for income tax purposes.
The income tax is calculated on a preceding year basis. The Year of Assessment refers to the income earned in the previous year.
For instance, Year of Assessment 2023, refers to income earned from 1 Jan 2022 to 31 Dec 2022. [3]
What Is the Income Tax Rate in Singapore 2023?
Keep in mind that tax residents are taxed at progressive tax rates. Here are the personal income tax rates for tax residents from YA 2017 to YA 2023: [4]
Personal Income Tax Rates for Residents in Singapore 2023
| Chargeable Income | Income Tax Rate (%) | Gross Tax Payable ($) |
|---|---|---|
| First $20,000 Next $10,000 |
0 2 |
0 200 |
| First $30,000 Next $10,000 |
- 3.50 |
200 350 |
| First $40,000 Next $40,000 |
- 7 |
550 2,800 |
| First $80,000 Next $40,000 |
- 11.5 |
3,350 4,600 |
| First $120,000 Next $40,000 |
- 15 |
7,950 6,000 |
| First $160,000 Next $40,000 |
- 18 |
13,950 7,200 |
| First $200,000 Next $40,000 |
- 19 |
21,150 7,600 |
| First $240,000 Next $40,000 |
- 19.5 |
28,750 7,800 |
| First $280,000 Next $40,000 |
- 20 |
36,550 8,000 |
| First $320,000 In excess of $320,000 |
- 22 |
44,550 |
How Much Tax Do Foreigners Pay in Singapore?
Employment income of non-residents is taxed at the flat rate of 15% or the progressive resident tax rates, whichever is the higher tax amount.
Taxes on director's fee, consultation fees and all other income
The tax rate for non-resident individuals is currently at 22%. It applies to all income including rental income from properties, pension and director's fees, except the employment income and certain income taxable at reduced withholding rates.
You may use the Tax Calculator for Non-Resident Individuals to estimate the tax payable.
Filing IR8A for Employee Earnings in Singapore
What is the IR8A Form?
In Singapore, employers must report to IRAS (Inland Revenue Authority of Singapore) about the total earnings of their employees for the whole year. Both individuals and businesses must make the report through the IR8A form.
IR8A (Employment Income) is a "Return of Employee's Remuneration" where it contains all the information needed to complete the filing of an employee's income tax return.
The IR8A form is required for all of these employees:
- Full-time resident employee
- Part-time resident employee
- Non-resident employee
- Company director (including a non-resident director)
- Pensioner
- Board Member receiving Board/Committee Member fees
- Employee who has left the company but was in receipt of income in 2020 (e.g stock options gains)
What Are the Other Required Tax Files?
- Appendix 8A (for payments of benefits-in-kind)
- Appendix 8B (gains from Employee Stock Option)
- Form IR8S (if excess CPF payments were made)
Take note that these forms must be submitted to IRAS by 1st March each year. If employers fail to comply, they may face charges under Section 94 of the Income Tax Act. Upon conviction, they may need to settle with a fine of up to $1,000 or imprisonment of up to 6 months. [5]
What is the Auto-Inclusion Scheme (AIS)?
The annual submission of IR8A is mandatory for all Singapore employers. It's a heavy amount of work for HR professionals every year. Therefore, an Auto-Inclusion Scheme (AIS) is established to lighten the workload and ensure accuracy and clarity throughout the tax filing process.
With the Auto-Inclusion Scheme (AIS), HRs can electronically submit the employees' IR8A information to IRAS. The submitted details will be automatically included in the employees' income tax assessment.
This way, there's no need to manually declare the lump sum amounts every year as well as issue the same forms to employees separately. It's also a much more convenient option for the employees because they don’t need to manually update all information.
As of 2021, it's compulsory for all employers with 5 or more employees to participate in AIS. IRAS will send a notice to electronically file the employment income of the employees. It is also compulsory for employers who have received the "Notice to File Employment Income of Employees Electronically under the Auto-Inclusion Scheme (AIS)".
For employers who didn't receive any notification from IRAS, you are encouraged to inform them at ais@iras.gov.sg.
NOTE: For companies who aren't required to participate, they can also join the AIS on an opt-in basis. The AIS registration for Year of Assessment (YA) 2022 is open till 31 December 2021.
For employers who are not under AIS, it’s required to provide the necessary forms to the employees by 1st March for them to file their income tax returns.
Does HRMS Allow Direct AIS Integration?
Streamlining regulatory compliance is also a part of HRMS’ functionalities. To avoid legal conflicts and consequences, HRMS helps businesses to understand and comply with legal matters.
HRMS solutions take into account local laws including state income tax, especially with a global workforce that comes with different regulatory compliances.
There are only a few HR softwares that offer auto-inclusion and regulatory compliance features. One of them is QuickHR, a fully integrated cloud-based HRMS that provides a centralised platform, helping HR professionals to fulfil all the IRAS obligations with precision and timeliness.
Therefore, companies must also consider the HRMS’ multifunctional platform for enhanced business workflow and smarter decision making.
How to Fill Out and Submit the IR8A Form with HRMS Software?
To help you navigate through the complicated and deadline-driven process, here’s a simple guide on how to submit the IR8A form with HRMS software.
- 1. For those who are participating in AIS for the first time, they must first authorise the staff-in-charge or the payroll vendor to submit the employment income information on their behalf at CorpPass. [6]
- 2. After confirming the authorisation, download the required tax forms from the IRAS official website to check the list of the required information. [7]
- A full-spectrum HRMS software such as QuickHR is directly integrated with IRAS through API, allowing employers to validate and submit employment income information through the automated platform.
For HRMS software like QuickHR, the tax forms can be automatically generated by the system.
QuickHR can automatically generate pre-populated tax files that can be submitted using the Validation and Submission Application. Download the latest Validation and Submission Application at the official website of IRAS. [8]
What If You Need to Make Changes after Submission?
If there's a need to update the employees’ income or deductions information after electronic submission, the employer could manually calculate and submit the difference in amount for the affected employee and not an overall revised value. [9]
Alternatively, you could let QuickHR handle the automatic calculation for you! Simply key in the revised amounts for the affected employees and we’ll do the rest.
An All-Inclusive HRMS Software with Automated IR8A Submission and Reporting
To help organisations prevent any legal complications and heavy fines and penalties, QuickHR offers auto-inclusion and full regulatory compliance features.
- Our comprehensive payroll module allows automatic calculations and deductions in adherence to government regulations. These include tailored CPF formulations, auto-calculated SDL contributions, Bank GIRO and CPF submission features, and MOM itemised payslips.
- Being an IRAS approved HRMS software solution, QuickHR guarantees smooth submissions by handling IRAS season with direct AIS linkage of payroll information captured on the system.
- Moreover, the Infocomm Media Development Authority (IMDA) has evaluated QuickHR as an effective, market-tested and cost-effective pre-approved solution for government grants offered to SMEs.
- QuickHR also provides hassle-free and 24/7 accessibility to employees’ data across all mobile devices, offering an adaptable solution for both HR professionals and employees to process and access real-time records.
- Most importantly, we have a dedicated team who assists in the implementation and utilisation of every module as well as other general queries. They provide data migration services where they can walk you through your first IR8A submission.
We gladly ensure a smooth transition to using our full-featured HR payroll software in Singapore. We’ll arrange a free demo session at your convenience and bring QuickHR closer to you!
If you want to know more about how we can help manage your income tax submissions in Singapore, feel free to request a free demo with absolutely no terms and conditions!
Sources:
- [1] https://www.iras.gov.sg/taxes/individual-income-tax/tax-bill-and-payment/making-changes-after-filing-receiving-tax-bill/errors-in-tax-returns
- [2] https://www.iras.gov.sg/taxes/individual-income-tax/basics-of-individual-income-tax/what-is-taxable-what-is-not
- [3] https://www.iras.gov.sg/taxes/individual-income-tax/basics-of-individual-income-tax/tax-residency-and-tax-rates/working-out-my-tax-residency
- [4] https://www.iras.gov.sg/taxes/individual-income-tax/basics-of-individual-income-tax/tax-residency-and-tax-rates/individual-income-tax-rates
- [5] https://www.iras.gov.sg/taxes/individual-income-tax/employers/auto-inclusion-scheme-(ais)-for-employment-income/join-the-auto-inclusion-scheme-(ais)-for-employment-income
- [6] https://www.iras.gov.sg/digital-services/others/corppass
- [7] https://www.iras.gov.sg/taxes/individual-income-tax/employers/auto-inclusion-scheme-(ais)-for-employment-income/reporting-employee-earnings-(ir8a-appendix-8a-appendix-8b-ir8s)
- [8] https://www.iras.gov.sg/taxes/individual-income-tax/employers/auto-inclusion-scheme-(ais)-for-employment-income/submit-employment-income-records#title1
- [9] https://www.iras.gov.sg/taxes/individual-income-tax/tax-bill-and-payment/making-changes-after-filing-receiving-tax-bill