Tax Clearance Requirement

When your foreign employee ceases to work for you in Singapore, you need to ensure that he has paid all his taxes before leaving Singapore. This process is known as Tax Clearance.

Step 1: Check Whether Tax Clearance is Required

Use the Tax Clearance Calculator (68KB) to check whether tax clearance is required. You do not need to proceed to Step 2 - Step 4 if tax clearance is not required.

Step 2: Notify IRAS via Form IR21

Complete Form IR21 at least one month before your non-citizen employee ceases employment in Singapore.

There will be a 10-day grace period granted for employer to meet the tax filing obligations. If you are not able to give one month's notice, please provide reason(s) in the Form IR21. Unless the Comptroller accepts shorter notice, employers who fail to comply may be liable to a fine of up to $1,000. Generally, IRAS accepts late notification with valid reasons such as immediate resignation.

Tips/Pointers

  1. If you are e-filing Form IR21, please login to myTaxPortal using Singpass or IRAS PIN. If you need assistance on completion of the IR21, you can refer to the user guide or i-help at myTaxPortal. For paper filing, please download the Form IR21 .
  2. When completing the Form IR21, you should include the income the employee earned in the year of departure as well as that earned in the preceding year, if that has not been transmitted to IRAS at the point of tax clearance.
  3. Severance payments as compensation for loss of office may not be taxable. You should provide IRAS with the necessary information for evaluation.
  4. Any gratuity for past services payable at the end of contract is taxable.
  5. Payments to employees for salary in-lieu of notice is taxable.
  6. When the employee has existing share options or stock awards on hand which have yet to be exercised or vested, they will be deemed to have derived gains from these at the point of tax clearance.

    This also applies to those with selling restriction. For more information, please refer to "What to do if there are unexercised stocks options?" for more information and complete the relevant appendix.

Step 3: Withhold Payment Due to Your Employees

You are also required to withhold any monies (including overtime pay, leave pay, all allowances and reimbursements, gratuities and lump sum payments, etc.) due to your employee from the day he notifies you of his intention to cease employment or when you notify him of the termination of employment or posting to an overseas location.

When you are unable to withhold monies, please state the reason in the Form IR21. Otherwise, you may be liable for the tax that is owed by the employee.

Step 4: IRAS Processes Tax Clearance

Generally, 80% of e-Filed cases will be processed within 7 working days. For paper filing, 80% are generally processed within 21 days.

Processing of tax clearance may take longer if the information given in Form IR21 is incomplete or when IRAS needs to seek clarification on the employment details submitted.

You can check the status of tax clearance via myTax Portal .

When there is a need to make changes to the original filing, please complete another Form IR21 by indicating "Amended" or "Additional" as appropriate.

Step 5: Receive Clearance Directive from IRAS

IRAS issues the Clearance Directive to your company by post after the tax clearance has been processed.

You can check the status of tax clearance via myTax Portal .

The Clearance Directive is available on myTaxPortal three working days from the date Form IR21 is processed. The Directive will tell you to release monies to your employee or to remit the taxes assessed to IRAS within 10 days.

Step 6: Tax Bill (Notice of Assessment) for Employee

Once IR21 has been processed, IRAS sends the tax bill to your employee. The employee will be informed to pay the difference if the amount withheld by you is not sufficient to pay his taxes. He can also view the electronic copy via myTax Portal using his SingPass or IRAS Pin .

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