Tax clearance proves that foreign employees, including Singapore Permanent Resident (SPR) employees, have their tax affairs in order after their employment has ended in Singapore. Tax clearance is also obligatory for foreign and SPR employees who plan to go to an overseas job posting and to leave Singapore for more than three (3) months.
Every employer is responsible for withholding all income due for tax clearance purposes and filing the tax clearance to the Inland Revenue Authority of Singapore. Filing for tax clearance must be done using Form IR21.
REQUIREMENT FOR TAX CLEARANCE IN SINGAPORE
According to the Companies Act, employers must notify IRAS one month before their foreign employees leave. Notably, only employees with a tax clearance from IRAS can proceed to leave the country. Therefore, tax clearance is required for employees that are:
Foreign employees with Work Pass holders that are going to:
- stop working for you in Singapore and start working overseas
- leave Singapore for more than three (3) months
FILING FORM IR21 FOR TAX CLEARANCE IS NOT OBLIGATORY FOR THE FOLLOWING:
1. A Citizen of Singapore.
2. A Singapore Permanent Resident (SPR) who will not leave the country after quitting their work position.
3. A Non-Singaporean who
- worked consistently for three years or longer and earned less than S$21,000 per year.
- Worked for at least 183 days over two years and made less than S$21,000 yearly.
- Worked for at least 183 days a year and made less than S$21,000 in total income.
- Worked for 60 days or fewer in a calendar year, excluding professional consultants, public performers, and corporate directors.
4. The foreign worker is transferred to another company in Singapore due to
- The company is merged or a takeover.
- A restructuring or different posting within the same companies
5. The employees are away for business purposes and training within three (3) to six (6) months.
IRAS ALSO OFFERS AN EXEMPTION ON TAX CLEARANCE FOR EMPLOYEES THAT ARE:
- The overseas work period is no longer than six (6) months.
- Throughout the overseas work period, the employee keeps a valid work pass issued by their employer and resumes employment with the same employer after returning to Singapore.
- The Singaporean employer still pays them while the employees work overseas.
If your employee fits into one of these categories or situations, you do not need to file Form IR21. Still, you must report the employee’s employment income to IRAS by the 1st of March of the following year using Form IR8A or the Auto Inclusion Scheme (AIS).
For more information about notifying the IRAS on employees who are not required for Form IR21 tax clearance, visit the official guideline on Tax Clearance for Employees on the Inland Revenue Authority of Singapore webpage.
PROCEDURES TO FILE FOR TAX CLEARANCE (FORM IR21)
According to the IRAS, an employer can file and submit for tax clearance (Form IR21) electronically via the online myTaxPortal. Physical submission is also possible by downloading the form online, paper filing Form IR21, and sending it to IRAS address.
Generally, the procedures to file for tax clearance are in seven (7) steps below:
- Check whether the tax clearance is mandatory for the foreign employee using the Tax Clearance Calculator.
- File Form IR21 to notify IRAS one (1) month before your foreign employee will terminate their employment, leave Singapore and work overseas for more than (3) months.
- Withhold all forms of monies from foreign employees that are due for tax clearance. Failure to withhold the employees’ monies may cause the employer to be liable for the amount on the tax clearance.
- Submit the Tax Clearance (Form IR21) to IRAS. The e-filed Form IR21 processing time will be around seven (7) working business days and twenty-one (21) days for paper-filed Form IR21.
- Check the tax clearance status at myTaxPortal. If IRAS requires amendments or further details, you must file an Amended Form IR21.
- Obtain the Clearance Directive notice from IRAS to pay the tax or release the withheld monies. The Clearance Directive Notice will be issued by post and received within five (5) to seven (7) working days. An electronic copy of the Clearance Directive is also available at myTaxPortal within three (3) days after Form IR21 is processed.
- Receive the Tax Bill (Notice of Assessment) as proof that the employee dues are paid. Accessing the electronic copy of the Tax Bill is possible using the Singpass or IRAS Unique Account.
REFUNDS AND TAX CREDITS FROM TAX CLEARANCE IR21
After 30 days from the tax credit date, IRAS will automatically repay any tax credits and pay interest on those not refunded.
If you want to see if you have any tax credits, you may log onto myTax Portal and choose “View Account Summary” from the “Account” menu. If your company has left Singapore under the condition that:
- Your bank account information has not been updated with IRAS
- Your mailing address has not been changed
IRAS’ attempts to return your tax credits may fail. To reimburse your tax credits, IRAS will try to reach you as soon as reasonably possible. To check for any tax credit or unclaimed money, you can visit the Unclaimed Monies held by government agencies on Singapore’s official webpage. To claim them, please reach out to IRAS.
PENALTIES FOR LATE OR FAILURE TO FILE FOR THE TAX CLEARANCE
Employers that commit one of the following two offenses, both of which are punishable by the authority:
- Late filing of tax clearance. This is because tax clearance must be filed at least one (1) month before the foreign employees terminate their employment or leave Singapore
- Not filing the tax clearance at all.
Possible consequences for both offenses are:
- Liable for compounds up to SGD 1,000
- Court Summon for the employer (including sole proprietor, partner, and director of a company)
In conclusion, Form IR21 is an essential method in Singapore to monitor overseas tax evaders. This is because it is difficult for any foreign employee to leave the country with unpaid tax debt. Thanks to the Form IR21 system, keeping track of the fulfillment of tax clearance compliances by employers and employees is more accessible.
If you have further inquiries about the ins and outs of the Tax Clearance and Form IR21 in Singapore, reach out to us at Relin Consultants and email our experts at email@example.com.
Where Can I Submit The Paper-filed Form IR21?
To paper-filed Form IR21, you can download the form in both a word file document or a PDF version and mail it to the Inland Revenue of Authority in Singapore address at:
Inland Revenue of Authority in Singapore
55 Newton Road
How Long The Process Of Tax Clearance Will Take?
If you opted for e-filed Form IR21, the tax clearance processing would take about seven (7) working business days. Meanwhile, for physical submission on paper-filed Form IR21, the process will take about twenty-one (21) days.
Where To Check The Status Of My Tax Clearance Submission?
After submitting the tax clearance (Form IR21), find out the status of your submission and whether there are any amendments or incomplete filing by the myTaxPortal official portal.