Overview and Role
The Inland Revenue Authority of Singapore (IRAS) is the government agency responsible for tax collection and administration in Singapore. Established as a statutory board under the Ministry of Finance in 1992, IRAS acts as the nation’s tax authority, overseeing and implementing the tax laws. It is in charge of assessing, collecting, and enforcing payment of taxes that fund the government’s operations and public services.
Key Responsibilities
IRAS administers all major taxes in Singapore, including:
• Income Tax: This covers both corporate income tax for companies and personal income tax for individuals, as well as withholding tax on certain payments to non-residents. Each year, IRAS manages the tax filing season (known as the Year of Assessment) where individuals and businesses declare income. It also issues tax assessments and collects the amounts due.
• Goods and Services Tax (GST): IRAS oversees the GST, which is a value-added tax on consumption. Businesses that meet the criteria must register for GST and charge it on their sales, and IRAS ensures compliance (including the periodic raising of GST rate, e.g. from 7% to 8% in 2023 and to 9% in 2024). IRAS audits companies to prevent GST evasion and handles GST refund claims for tourists or overseas business transactions.
• Property Tax: An annual tax on property ownership (based on the annual value of properties) is collected by IRAS. This applies to residential, commercial, and industrial properties.
• Stamp Duties: IRAS collects stamp duties on legal documents like property purchase agreements and shares transfers. These include Buyer’s Stamp Duty and Additional Buyer’s Stamp Duty (ABSD) on property transactions, as well as duties on leases and mortgages.
• Others: IRAS also handles Betting and Sweepstakes Duties, Casino tax, and oversees the administration of the Carbon Tax. In addition, IRAS may implement various tax schemes or incentives on behalf of the government, such as the Jobs Support Scheme payouts or Productivity and Innovation Credit (PIC) in past years – showing that its role can extend to disbursing grants or reliefs via the tax system.
Interaction with Employers and Payroll
While IRAS is a tax agency (not a labor agency), it intersects with HR/payroll in several ways:
• Employer Tax Reporting: Singapore’s system generally does not require monthly withholding of income tax from employees’ salaries (unlike PAYE systems elsewhere). However, employers must prepare annual income reports for their staff. Many companies participate in the Auto-Inclusion Scheme (AIS) with IRAS, where they submit employees’ income information (such as salary, bonus, CPF contributions, benefits-in-kind) electronically to IRAS each year. This data pre-fills employees’ tax returns and ensures accurate taxation. HR departments are responsible for this reporting by the stipulated deadlines.
• Tax Clearance for Foreign Employees: When a non-citizen employee (e.g. an Employment Pass holder) is terminating employment or leaving Singapore, the employer is obliged to seek tax clearance from IRAS. This involves filing a special form (IR21) and withholding any due payments to the employee until IRAS confirms that all taxes are settled. This ensures foreign employees pay any owed tax before leaving the country.
• Employee Benefits and Tax: IRAS provides guidelines on how various employee benefits are taxed. For instance, certain benefits are taxable perks (like housing allowance, car benefits), while others might be tax-exempt up to a limit (like employer-provided medical benefits or staff welfare). HR and payroll teams must compute and report such benefits correctly. IRAS publishes an e-Tax Guide on the Tax Treatment of Employee Remuneration which employers use as a reference.
• Skills Development Levy (SDL) and others: Although not a tax per se, employers pay a mandatory Skills Development Levy (discussed below) for each employee. While the SDL is administered by SkillsFuture Singapore, the IRAS website provides information on its tax treatment (for example, clarifying that SDL is a deductible business expense and not taxable income to the employee ). Similarly, the Foreign Worker Levy and CPF contributions, while outside IRAS’s direct purview, have implications for corporate tax (as deductible expenses) and IRAS often clarifies such treatments in their materials.
Importance
IRAS plays a crucial role in Singapore’s governance by ensuring compliance with tax laws which in turn fund public infrastructure, education, healthcare, defense, and other national needs. For businesses, IRAS is the face of the tax regime – it provides certainty and clarity through advance rulings, taxpayer education, and a generally business-friendly approach (Singapore consistently ranks high in ease of paying taxes). At the same time, IRAS is strict on tax evasion and imposes penalties or prosecutions for serious non-compliance, maintaining the integrity of the system.
From an HR perspective, understanding IRAS regulations ensures proper fulfilment of obligations like reporting employee earnings and handling tax clearance. Inadvertent errors in tax reporting can lead to penalties for the company or issues for employees, so HR/finance teams work closely with IRAS guidelines. IRAS is also fairly tech-forward – most interactions (tax filing, retrieval of documents, payments) are done via its online portal (myTax Portal), which has streamlined compliance for companies and individuals alike.In summary, IRAS is the tax guardian of Singapore, essential for collecting revenues and upholding the law. For anyone dealing with payroll or employment in Singapore, IRAS is a key stakeholder ensuring that statutory contributions and taxes related to employment are properly accounted for and remitted.
