The Inland Revenue Authority of Singapore (IRAS) has intensified its focus on tax compliance, leading to a noticeable uptick in employment income tax audits. These audits aim to verify the accurate reporting of employment income details under the Auto-Inclusion Scheme (AIS). This trend underscores the growing importance of understanding individual tax compliance obligations and the crucial role employers play in ensuring accurate and timely reporting.
Common reporting pitfalls
Accurate and timely reporting of employment income is crucial for avoiding penalties and adhering compliance with tax regulations. Employers and employees should focus on the following areas:
Taxable income
| Examples of taxable income | |||
| Cash compensation | Benefits-in-kind | Equity-based
awards | Trailing payments |
| Salary | School fees | Restricted share units | Trailing bonus/ deferred cash payment relating to Singapore employment |
| Allowances | Housing benefit | Stock options | |
| Bonus | Home leave | Employee share
purchase scheme (ESPP) | |
| Deferred cash payments | Employer’s contribution
to overseas pension fund/social security scheme | ||
| Relocation allowance | |||
| Director’s fee | |||
Certain income components are often overlooked but remain taxable, including:
Equity-based compensation
Ways to maintain compliance
Employers can take the following steps to ensure compliance and minimize audit risks:
Proactive steps to mitigate audit risks
Employers can reduce audit risks and support compliance by taking the following steps:
Periodically review payroll and AIS submissions to identify and correct discrepancies.
Reassess policies to ensure proper documentation and reporting of benefits and various remuneration items.
Organize key documents, including annual payroll summaries, employee handbooks, and meeting minutes approving directors’ fees, to be readily available in the event of an audit.
By addressing these areas and implementing proactive measures, employers can enhance compliance and reduce the risk of penalties or audit complications.
The rise in employment income audits underscores the need for heightened vigilance from both employees and employers. By adopting robust compliance measures, employers can reduce audit risks, safeguard employee trust, and contribute to a transparent tax environment. Proactive steps today can prevent costly errors and ensure alignment with IRAS expectations.
As we observe greater collaboration among statutory bodies, it is plausible that the CPF Board may also intensify its audits. Notably, there is no statute of limitations for CPF Board audits.
How can Vialto Partners help?
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Grace Huang
Partner
Katrina Fernandez
Senior Manager
Kajalpreet Kaur
Manager
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