Working as an employer in Singapore has its advantages, but it also comes with its share of tax requirements. For example, when it comes to paying taxes, the IR21 is one of the numerous forms you should anticipate filling out at a particular time. And, in case you’re wondering, failing to submit it on time might result in significant penalties.
To assist you in preventing this, this blog presents an overview of Form IR21. It describes what Form IR21 is, how it relates to Singapore’s tax clearing procedure, and how and when you could perhaps be required to submit one.
What is Form IR21?
Form IR21, unlike Form IR8A and others, is not an annual requirement. It only applies when a foreign employee (including Singapore Permanent Residents) leaves Singapore for more than three months, accepts an overseas contract, or leaves your company.
In this instance, the Inland Revenue Authority of Singapore (IRAS) needs you to fill out Form IR21 to request approval for the absent employee.
That’s not all, though. While you’re about it, you should also withhold all monies owing to the employee for tax purposes.
Overall, one may consider the IR21 to be a tax clearing procedure for Work Pass holders who leave their local assignments. The only difference is that their company is responsible for filing the paperwork and obtaining approval.
What Is the Significance of Form IR21?
Form IR21 is essentially Singapore’s technique of catching international tax evaders. IR21 makes it difficult for any foreign employee to depart the nation with a tax debt by transferring tax clearance requirements to employers.
According to Singapore legislation, employers must utilise IR21 to properly inform IRAS at least one month before their employees leave. Following that, only once IRAS has cleared the employees can their employers release the withheld payments.
Who Needs to File From IR21?
Employers who hire overseas workers in Singapore utilise an IR21. Employers submit this form to the IRAS to get tax clearances for overseas staff. Employers must file this form whenever it is necessary and withhold any money that would otherwise be owed to the employee for tax purposes.
What Exemptions Are Available From Filing Tax Clearance Form IR21?
IR21 tax clearance is not a requirement if your employee falls within the following criteria:
- A Singaporean national.
- After quitting work with you, a Singapore Permanent Resident (SPR) who will not be leaving the country permanently.
- A non-Singapore citizen who has worked in Singapore for three years or more and earned less than S$21,000 per year.
- A non-Singapore citizen who worked for 183 days or more in the previous two years and earned less than S$21,000 per year.
- A non-Singapore citizen who worked for at least 183 days in a calendar year and earned less than S$21,000 per year.
- Except for professional advisors, public performers, and corporate directors, a non-Singapore citizen who worked for 60 days or fewer in a calendar year.
Employees stationed overseas are also exempted by the IRAS if the following conditions are met:
- The time spent working abroad is limited to six months.
- During the foreign assignment, the person keeps a valid work pass with their employer and subsequently returns to Singapore to work for the same company.
- While the employee is sent overseas, the Singapore employer continues to pay them.
How to File Form IR21?
According to the IRAS, you must file an IR21 at least one month before your employee leaves.
The actual technique for filing tax clearance form IR21 is as follows:
- You might choose to fill out and submit the IR21 online for faster tax clearance. After checking in with your company’s CorpPass credentials, you may accomplish this using IRAS’s myTaxPortal.
- Once you’ve logged in, you should input your employee’s earnings for the year of leaving.
- In the meanwhile, you should withhold all overdue dues from your employee, including lump-sum payments, gratuities, reimbursements, allowances, leave pay, overtime pay, and so on.)
- When you’re finished, allow around 7 working days for the IRAS to process the e-filed IR21. Paper-filed forms would otherwise take roughly 21 days to process.
- Within three working days, after the IRAS processes the paperwork, you’ll obtain a tax Clearance Directive via myTax Portal. The IRAS also delivers it via mail, which should arrive within five to seven business days.
- You must remit the monies to the IRAS within ten days if the Clearance Directive turns out to be a Directive to Pay Tax. A Notification to Release Monies, on the other hand, says you can go ahead and pay the employee.
When Should You Submit Form IR21?
If tax clearance is necessary for your employee, you must file the Form IR21 at least one month before:
- If the employee no longer works for you in Singapore.
- The employee is assigned to an abroad assignment; or
- If the employee is absent from Singapore for more than three months,
What Are the Form IR21 Filing Options?
There are just two options for submitting Form IR21:
The most preferable method is to use the e-filing choices. You will be needed to register with the IRAS using their My Tax Portal. You will receive an immediate message after you have completed the filling procedure completely. When compared to paper filling, e-filing is more convenient and faster. Finally, you may examine and print the clearance instruction online. You don’t have to wait for the taxman to mail it to you.
Filing of Paper
Paper filing is an option if you are not comfortable with online filing. You’ll need to fill out the IR21 form online here. Fill out the forms manually and mail them to the address listed below after you’ve finished:
Inland Revenue Authority of Singapore
55 Newton Road
After more than 21 days of processing, you will get a tax clearing directive via mail from IRAS.
What Documents Do You Receive Once Your Tax Clearance Has Been Filed?
IRAS will send you a Clearance Directive once your taxes have been cleared. You will either receive:
- Directive to Pay Tax, which tells you how much money you need to send to the IRAS; or
- Notification to Release Monies, which instructs you to release the withheld funds to the employee.
Generally, you must get tax clearance for your non-Singapore Citizen employee (i.e. international or Singapore Permanent Resident employee) when he leaves Singapore, goes on an abroad assignment, or wants to leave Singapore for more than three months.
As an employer, you are responsible for filing Form IR21 and withholding all funds owed to the employee for tax purposes. This is true for all work permits, including the Personalised Employment Pass (PEP).