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20 August 2021

Tax Clearance for Non-Singapore Citizen

Generally, when your non-Singapore Citizen employee ceases employment with you in Singapore, goes on an overseas posting or plans to leave Singapore for more than three months, you must notify IRAS at least one month in advance and withhold all monies due to the employee from the date you are aware of his impending cessation of employment or departure from Singapore. This process is known as tax clearance.

This article serves as a quick guide to this process.  For full details, please refer to the IRAS.  

 

Step 1: Find Out Whether Tax Clearance is Required

  

If your non-Singapore Citizen employee falls under any of these categories/scenarios, you do not need to file the Form IR21:

•   

Singapore Permanent residents that will stay in Singapore after leaving your employment
Note: You must have the Letter of Undertaking (LOU) from the employee ensuring he or she plans to stay in Singapore.

Worked for 60 days or less in a calendar year
(Scenario 1 example)

Worked for 183 days or more within a calendar year and earned less than $21,000 annually
(Scenario 2 example)

Worked for 183 days or more within a continuous period straddling two years and earned less than $21,000 annually
(Scenario 3 example)
Note: It does not apply to directors of a company, public entertainers or individuals exercising a profession, vocation or employment of a similar nature.

Worked for three continuous years or more and earned less than $21,000 annually
(Scenario 4 example)

  

You can also use IRAS Tax Calculator to check to find out whether you are required to file the Form IR21 for your non-Singapore Citizen employee.
If you do not need to file the Form IR21, you must still submit the employee's employment income to IRAS via the Form IR8A or Auto Inclusion Scheme (AIS) by 1st Mar of the following year.

 

Step 2: Notify IRAS via Form IR21

   File the Form IR21 at least one month before your non-Singapore Citizen employee ceases employment with you in Singapore, goes on an overseas posting or leaves Singapore for more than three months. You can file electronically at myTaxPortal.

 

 

Step 3: Withhold Payment Due to Your Employee

   You are required to withhold all monies (overtime pay, leave pay, allowances, reimbursements, gratuities, lump sum payments, etc.) due to your employee from the date you are aware of the employee's impending cessation of employment or departure from Singapore.

 

 

Step 4: IRAS Processes Tax Clearance

   Generally, 80% of e-Filed Form IR21 will be processed within 7 working days. 

 

 

Step 5: Receive Clearance Directive from IRAS

  

Upon tax clearance, you will receive a Clearance Directive by post. An electronic copy of the Clearance Directive will be made available at myTax Portal within three working days from the date the Form IR21 is processed.
The Clearance Directive can be

•   

Directive to Pay Tax is to inform you of the amount of monies to be remitted to IRAS. The payment needs to be made within 10 days from the date of the Directive to Pay Tax.

•   

Notification to Release Monies is to inform you to release the withheld monies to your employee. 

 

Step 6: Employee Receives Tax Bill

   Your employee will receive a tax bill via post. He or she can also view the electronic copy at myTaxPortal.