When your foreign employee ceases to work for you in Singapore, you need to ensure that they have paid all their taxes before leaving Singapore. This process is known as Tax Clearance and is described on the IRAS website.
You need to complete and submit to IRAS Form IR21 for all non-citizen employees who cease employment or plan to leave Singapore for longer than 3 months. Employees for whom this form is submitted will not have IR8As, and SimplePay excludes them from the XML file that is generated for e-Submission to IRAS.
Please note: Form IR21 cannot currently be downloaded from SimplePay. However, a transaction history report can be used to obtain the information needed to complete the form.
For more information about transaction history reports, please refer to:
Reports > Transaction History Report
Tax Clearance Exemptions
On its website, IRAS outlines four scenarios where tax clearance is not required. They are as follows:
- Non-Singapore citizen employee who worked in Singapore not exceeding 60 days in a calendar year. This does not apply to directors of a company, public entertainers or individuals exercising a profession, vocation, or employment of a similar nature.
- Non-Singapore citizen employee who worked in Singapore for at least 183 days within a calendar year and earned less than $21,000 annually.
- Non-Singapore citizen employee who worked in Singapore for at least 183 days within a continuous period straddling two years and earned less than $21,000 annually. This two-year administrative concession is only applicable for foreign employees who enter Singapore from 01 Jan 2007. It does not apply to directors of a company, public entertainers or individuals exercising a profession, vocation or employment of a similar nature.
- Non-Singapore citizen employee who worked in Singapore for three continuous years or more and earned less than $21,000 per year.
The IRAS website also has a “Tax Clearance Calculator” available, which you can use to check whether tax clearance is required.
Steps in Tax Clearance
Once you have established that tax clearance is required for one of your employees, a few more steps need to be completed:
- You should notify IRAS by completing Form IR21 at least one month before your non-citizen employee ceases employment in Singapore. You might qualify for a 10-day grace period if you provide a valid reason for late filing such as immediate resignation. IRAS also provides “Tips / Pointers” for the filing of Form IR21.
- You are further required to withhold monies (including overtime pay, leave pay, all allowances and reimbursements, gratuities, lump sum payments) due to your employee from the day they notify you of their intention to cease employment, or when you notify them of the termination of employment or posting to an overseas location.When you are unable to withhold monies, you should state the reason in Form IR21; otherwise, you might be liable for the tax that is owed by the employee. Refer to the following help page to learn how to withhold income on SimplePay:
Payroll Processing > System Items > Income Withheld (Tax Clearance)
- IRAS will then process the tax clearance – 80% of e-Filed cases within 7 working days and 80% of paper-filed cases within 21 days. Processing may take longer if the information given in Form IR21 is incomplete, or when IRAS needs to seek clarification on the employment details submitted.
- After the tax clearance has been processed, IRAS will issue a “Clearance Directive” – telling you to release monies to your employee or to remit the taxes assessed to IRAS within 10 days. To learn how to capture the release on SimplePay, go to the following help page:
Payroll Processing > System Items > Income Paid Out After Tax Clearance
- After the IR21 has been processed, IRAS will send a tax bill to your employee. The employee will be informed to pay the difference if the amount withheld by you was not sufficient to pay his taxes.
For more information about how to process Form IR21 and tax clearance on SimplePay, please refer to the following:
Payroll Processing > Service Periods > Employees Requiring Form IR21
Payroll Processing > Service Periods > Ending an Employee’s Service