When your contract for work is about to end or you decide to work for another company or plan to leave Singapore for more than three months, your employer needs to ensure that you pay all your taxes before you go. This process is known as Tax Clearance.
Step 1: You give notice to your employer
Example: You tender resignation on 16 Aug 2012 giving one month’s notice to your employer. Your last day of service is 15 Sep 2012.
Your employer will need to notify IRAS as soon as they are aware of your impending departure. IRAS can then work out your tax liability, up to the last day of your work. This will allow you time to settle all your taxes before your departure from Singapore or before you move to your new job.
Step 2: Your employer notifies IRAS and withhold monies from your payroll
To ensure that you pay all your taxes before you leave Singapore, your employer is required to withhold payment of all monies (including salary, bonus, overtime pay, leave pay, allowances, gratuities, lump sum payments, etc.) due to you from the day you gave notification of your intention to leave the job or depart from Singapore.
Step 3: IRAS processes tax clearance for you
Generally, IRAS takes about 7 working days to complete this process if your employer e-Files the Form IR21. If the Form IR21 is filed via fax or post, then it will take about 21 days. You should check with your employer that the Form IR21 has been filed.
Step 4: IRAS determines your tax liability
Based on the income information in the Form IR21, IRAS will work out your tax liability.
Points to note:
- The tax assessed will include the income you earned in the year of departure as well as that earned in the preceding year, if that has not been assessed at the point of tax clearance.
- If your employer pays you salary in-lieu of notice, such payment is taxable in your hands.
- If you receive severance payments in the nature of compensation for loss of office, then such payment may not be taxable. Your employer should provide IRAS with the necessary information for evaluation.
- Any gratuity for past services payable at the end of contract is taxable.
- If you have been contributing to the Supplementary Retirement Scheme (SRS) and plan to withdraw from the scheme, such early withdrawals are taxable in your hands. Your SRS Operator will deduct 20% tax from such withdrawals. If you wish to have this set-off against your income tax bill, you should provide IRAS with the SRS Statement of Contribution/Withdrawal (for Tax Clearance) Form, duly certified by the SRS Operator.
- Where deferral of tax payment has been granted on gains from stocks/shares, the deferred tax plus interest will become due immediately upon tax clearance.
- If you have any existing share options or stock awards on hand which have yet to be exercised or vested, you will be deemed to have derived gains from these at the point of tax clearance. This also applies to those with selling restriction. Refer to Stocks for more information.
Step 5: Your employer will receive the clearance directive
Once your tax liability has been determined, IRAS will send a Tax Clearance Directive to your employer to pay the tax assessed to IRAS (out of the monies withheld from your payroll).
Step 6: You will receive the tax bill (Notice of Assessment)
IRAS will send you the tax bill. If the monies withheld from your payroll are not sufficient to pay your taxes, you must settle the difference before departure. If there is outstanding tax, you will be stopped from leaving Singapore. In such instance, you will need a release letter from IRAS.
Points to Note
- Please update your overseas address and contact details via myTax Portal at www.iras.gov.sg using your SingPass or IRAS PIN so that any subsequent tax bill can be sent to you. If you do not have one, you may apply for one online at our website.
- If you have an existing GIRO Instalment Plan to pay your income taxes, the plan will be automatically terminated once tax clearance kicks in.
- You will need to make a once-off payment in the form of cash or a cashier's order at any Post Office. Personal cheque and payment made via vPOST are not acceptable for tax clearance purpose.
- If the taxes remain unsettled, IRAS may instruct your bank to remit the tax to IRAS as part of our tax recovery process.
- If you disagree with the tax amount, you may email to email@example.com within 30 days from the date of the tax bill, stating your reasons. Regardless of any objection, the full tax payable must be settled immediately. IRAS will review and inform you of the outcome of the objection. If there is any tax overpaid resulting from the amended tax bill, IRAS will refund you within 30 days.