Navigating The Year End IR8A Minefield
We have come to the time of the year when all employers are required by law to report their employees earnings for the year again !
All employers are required by law, i.e. Section 68(2) of the Income Tax Act, to prepare Form IR8A and Appendix 8A, Appendix 8B or Form IR8S (where applicable) for all your employees who are employed in Singapore, by 1 March each year.
Employers (including those participating in AIS) who fail to comply may be charged under Section 94 of the Income Tax Act. The penalty upon conviction is a fine not exceeding $1,000 and in default of payment to imprisonment for a term not exceeding 6 months.
Let me try to share my some relevant pointers with regards to this topic in 4 areas :-
- Whom to Report
- When to Report
- What to Report
- How to Make it Less Painful
1. Whom to Report
- Full-time resident employee
- Part-time resident employee
- Non-resident employee
- Company director (including a non-resident director)
- Pensioner and
- Employee who has left the organization but was in receipt of income in 2016 (e.g. stock options gains)
2. When to Report
2.1 The completed Form IR8A and/or Appendix 8A/8B (for year ended 31 December 2016) should be given to your employees by 1 March 2017
2.2 Recommended e-file by 10 February to avoid peak rush (for AIS)
2.3 The submission portal will usually open every Tuesday to Thursday till December for amendment submissions
2.4 Extension of the 1 March deadline is granted only on a case-by-case basis under extenuating circumstances.
2.5 To request for an extension –
a.You must make the request by 1 March
b.You should email to [email protected] stating – name of organization, UEN, expected date of submission, and reason(s) for extension
2.6 Reasons that will not be favorably considered for extension
a. Need more time to collate information
b. Not enough manpower
c. Key personnel for e-submission is not around (e.g. overseas, on leave)
d. Key personnel for e-submission has resigned without proper handover
3. What to Report
3.1 Basic Tax Principles
a. All gains and profits derived by an employee in respect of his employment are taxable, unless they are specifically exempt from income tax or are covered by an existing administrative concession
b. The gains or profits include all benefits, whether in money or otherwise (i.e. in-kind), paid or granted to him in respect of employment.
Some areas which may typically be overlooked –
3.2 Benefits Extended to Family and Friends
Where employers also extend the benefits to the employee’s family members, relatives and friends, the benefits would be taxable in the hands of the employee as a benefit from employment
3.3 Conditional Payments Made in Advance
retention bonus, sign-on bonus with conditions of stay, etc, are taxable
3.4 Claiming Relocation Expenses as Deductions
Relocation expenses are deductible against the cash allowance provided. The excess of the relocation allowance from the relocation expenses is taxable.
If the relocation expenses claimed exceed the allowance given, the excess will be disregarded and cannot be used to offset against other income
3.5 Flexi-Benefit Schemes: Taxable vs. Non-Taxable Reimbursements
a. If an employee seeks reimbursement for an item that has been granted concession or exempt from tax, the reimbursement is not taxable. Reimbursement for an item that has not been granted concession or exempt from tax is taxable.
b. For example, reimbursement to an employee for expenses incurred for medical treatment sought by the employee remains not taxable even if the reimbursement is claimed under the flexible benefits scheme.
c. On the other hand, holiday reimbursement remains taxable even if it is one of the items which an employee can claim under the scheme.
Offering benefits under the flexible benefits scheme does not change the tax treatment of the benefits.
An employer offering the flexible benefits scheme would have to make a distinction between taxable and non-taxable benefits.
The employer has to keep track of the taxable items so that the taxable benefits are reported in the Form IR8A.
4. How to Make it Less Painful – Preparatory Work
- IR8A Mapping – check your payroll system set-up before generating your forms, it will save you a lot of headache later
- Particulars Updating – ask your staff for updates so that you don’t have to run amendments for changes like address, marital status, etc
- BIK Checklist – knowing what benefits are taxable will help avoid under-reporting
Good Luck !
If you need help, feel free to contact us at :
(M) +65 90880669
