Singapore presents a great opportunity for multi-national companies to expand their operations. In order to be successful, however, employers must comply with a range of comprehensive rules and regulations. While our first two posts on payroll in Singapore focused on key parts of the nation’s Employment Act and its leave policies, this post will provide an overview of another crucial factor of hiring employees in Singapore – income tax. The following list highlights some of the most important areas to consider when expanding operations to Singapore.

Singapore’s Tax Principle
One of the major tenants of employee remuneration in Singapore is that all gains and profits an employee receives from their employer are taxable, unless they are specifically exempt from income tax or qualify for an existing administrative concession. Gains and profits also include all benefits, and any benefits extended to an employee’s family members, relatives or friends are considered taxable as well.

Responsibility of the Employer
An employer is required to prepare Form IR8A, Appendix 8B or Form IR8S for all employees in Singapore by March 1 of each year. The amount of payments to be withheld is based on a progressive tax system that ranges from $0 (for those who make $20,000 or less) to a maximum of 20 percent of an employee’s income (for individuals who receive more than $320,000 in chargeable income per year).

Auto-Inclusion Scheme for Employment Income
Organizations with 15 or more employees are required to submit their employees’ income information electronically to the Inland Revenue Authority of Singapore (IRAS), and companies with less than 15 employees can enter this program voluntarily. Under the Auto-Inclusion Scheme, employers are not required to distribute hard copies of the tax form IR8A, as such information is included on pay slips or via their Income, Deductions and Reliefs Statement available from myTax Portal.

Proper Record Keeping
Under Singapore’s Income Tax Act and GST Act, employers are required to keep proper records of all employees’ income and deductions that have been submitted to the IRAS. Companies that fail to do so may be subjected to penalties or their expenses claimed can be disallowed. To help employers ensure compliance with its record keeping policies, the IRAS offers a comprehensive record keeping guide.

Although Singapore is well known for its strict yet simple laws affecting many aspects of daily life, its payroll and taxation policies aren’t as clear. To successfully hire and compensate employees in Singapore, a deep understanding of these rules and regulations is integral. But rather than trying to make sense of everything on their own, organizations can benefit from working with CloudPay to manage their payroll processes in Singapore, the larger APAC region and in more than 160 countries around the world!