Understanding the Singapore IR21 Form: Essential Information for Employers
What is tax clearance for foreign and SPR employees (IR21)?
Tax clearance is a process where employers must notify the Inland Revenue Authority of Singapore (IRAS) at least one month in advance before a non-Singapore citizen employee ceases employment, goes on an overseas posting, or leaves Singapore for more than three months. The employer must also withhold all monies due to the employee from the date they are aware of the impending cessation or departure. This is done by filing the Form IR21 with IRAS. It aims to ensure that individuals do not depart with outstanding tax liabilities, thereby maintaining compliance with tax regulations.
When is tax clearance required for an employee?
In general Tax clearance is required in Singapore when an employee ceases employment, goes on overseas posting, or plans to leave Singapore for more than three months.
What types of employees are subject to IR21 tax clearance?
Employee Type | Tax Clearance Required |
---|---|
Non-Singapore Citizens (e.g., Work Permit, S Pass) | Yes |
Singapore Permanent Residents (PRs) | Yes, if permanently leaving Singapore |
The types of employees subject to IR21 tax clearance are:
- Non-Singapore Citizens. This refers to employees who are not Singapore citizens and not permanent residents (PRs). It's important to note that employees holding a Singapore Work Permit, Employment Pass, or S Pass are not automatically considered permanent residents. Therefore, a non-Singapore citizen employee could either be a PR or not.
- Singapore Permanent Residents (PRs) employees who are permanently leaving Singapore after their employment ends are also subject to IR21 tax clearance.
When does an employer need to file IR21?
Employers must file the Form IR21 at least one month before:
- The employee ceases to work for them in Singapore
- The employee starts an overseas posting
- The employee leaves Singapore for any period exceeding three months
What is the process for determining if tax clearance is necessary?
To determine if tax clearance is necessary, employers can:
- Use the online Tax Clearance Calculator provided by IRAS to check if their employee requires tax clearance. Or you may use this tool.
- Review Employment Status: Check if the employee is a foreign worker, their length of stay, and earnings in Singapore.
- Consult with IRAS: If there is uncertainty regarding past employment or tax obligations, it’s advisable to contact IRAS directly for clarification.
- In any case, you can notify IRAS and fill out the necessary information to determine whether tax clearance is required. It is important to submit the notification at least one month before the employee's cessation of work, overseas posting, or departure from Singapore for more than three months. And also it is important to pay employee’s last payslip only after all taxes withheld and paid to government.
When is tax clearance not required?
Tax clearance is primarily focused on income levels and residency status. The critical income threshold is $21,000; if an employee earns below this amount, they may be exempt from tax clearance regardless of how many days they worked. Certain professional roles have additional considerations regarding exemptions.
Tax clearance is not required for:
- Singapore citizens
- SPRs who are not leaving Singapore permanently after ceasing employment (the employer must obtain a Letter of Undertaking from the employee);
- Non-citizens who worked for 60 days or less, except Professional advisors, Public performers, Corporate directors;
- Non-citizens who worked 183 days or more with annual income less than $21,000, or 3 continuous years with annual income less than $21,000;
- Non-citizens transferred to another company in Singapore due to merger, takeover, or restructuring;
- Non-citizens away from Singapore for 3-6 months for training, business, or overseas posting and employee maintain a valid work pass and return to work for the same employer in Singapore, and employer continues to pay them during the overseas assignment.
What are the steps involved in filing IR21?
- At first must determine whether tax clearance is required (must pay attention if non-citizen ceases employment in Singapore, starts overseas posting, leaves Singapore for more than three months).
- If tax clearance is required, must gather necessary information about the employee (total earnings for the year, including bonuses, severance and allowances.
- Ensure all dues owed to the employee are withheld until tax clearance is obtained (Clearance Directive from IRAS received).
- Then the employer must file/submit the Form IR21. This can be done electronically at the myTax Portal, using company’s CorpPass credentials. [2] Paper filing is also possible. You can send it by post to: Inland Revenue Authority of Singapore, 55 Newton Road, Singapore 307987. Must ensure that submission is made at least one month before the employee's departure or cessation of employment.
- IRAS will process the Form IR21 and issue either a Directive to Pay Tax or a Notification to Release Monies to the employer. [2]
- Withhold Payments: Withhold all payments due to the employee from the date you are aware of their impending departure or cessation of employment.
- The employee will then receive a tax bill (Notice of Assessment) from IRAS.
What is the timeline for filing Form IR21?
Minimum Notice Requirement. Employers are required to submit Form IR21 at least one month before any of the following events:
- The employee resigns or ceases employment in Singapore.
- The employee is assigned to an overseas posting.
- The employee plans to leave Singapore for more than three months124.
Submission Methods and processing of filing. In case of Electronic Filing via the myTax Portal IRAS issues clearance directives within three working days after submission24. In case of Paper Filing processing can take up to 21 days, so it's crucial to account for this longer timeline when planning submissions. Need to take into account that IRAS may require some corrections, etc.
Post-Submission Process. After filing, employers will receive a Clearance Directive from IRAS. This directive will indicate whether the employer needs to pay tax on behalf of the employee or if they can release withheld funds. The directive is sent electronically within three working days and via post within five to seven working days
What information needs to be included in the IR21 form?
Employer’s Details:
- Company Tax reference number
- Company name
- Address
Employee Details:
- Full Name: The name of the employee as per official documents.
- Foreign Identification Number (FIN) or National Registration Identity Card (NRIC): This is crucial for identifying the employee in the system.
- Date of Birth: To verify the identity of the employee.
- Citizenship, marital, email etc.
Employment details:
- Position/Job Title: The job title or position held by the employee.
- Period of Employment: Start and end dates of employment in Singapore.
- Reason for Departure: Indicate whether the employee is resigning, going on an overseas posting, or leaving Singapore for more than three months.
- Provide an explanation if notice of less than one month is given to IRAS prior to the employee's cessation of employment.
Income Details:
- Year-to-Date Earnings: Total earnings for the year up to the date of departure, including salary, bonuses, and any other compensation.
- Income for Previous Year: Any income earned in the preceding year that has not been reported via the Auto-Inclusion Scheme (AIS)
- Date when last salary was paid. Amount of last salary paid. Additional information (employee bank details, etc.).
- Monies Owed. A declaration of all amounts owed to the employee at the time of departure, which may include: Final salary, Overtime pay, Leave pay, Gratuities, Allowances and reimbursements.
Tax Withholding Information
- Amount of Monies Withheld: The total amount of money withheld for tax clearance purposes.
- Details of Unexercised Share Options or Awards: Information regarding any unexercised share options or unvested share awards that may affect the tax calculation.
Employer Declaration. The employer must sign and declare that all information provided is accurate and complete.
Additional Documentation. Employers may need to attach supporting documents, such as a Year-to-Date Payroll Report, which provides a detailed breakdown of the employee's earnings and deductions.
What are the penalties for late or non-filing of IR21?
Penalties for Employers
Type of Penalty | Description | Amount / Consequence |
---|---|---|
Late Filing Penalty | Fine for failing to file Form IR21 by the due date. | Up to $1,000 per employee for each late submission |
Legal Action | Court summons for failing to file Form IR21. | Fines not exceeding $5,000 for each offense |
Enforcement Actions | Appointment of agents (like banks or lawyers) to recover owed taxes. | N/A |
Travel Restrictions | A Travel Restriction Order (TRO) preventing departure from Singapore. | N/A |
Composition Offer | An offer to settle without prosecution based on compliance history. | Up to $5,000 |
Late Filing Penalty. Employers who fail to file Form IR21 by the due date may incur a fine of up to $1,000 per employee for each late submission.
Legal Consequences. If the employer does not file Form IR21, they may face legal action, including:
- Court summons with potential fines not exceeding $5,000 for each offense.
- Enforcement actions such as appointing agents (like banks or lawyers) to recover owed taxes.
Travel Restrictions. A Travel Restriction Order (TRO) may be issued against the employer, preventing them from leaving Singapore until tax obligations are settled.
Composition Offer. Instead of prosecution, IRAS may offer a composition amount (up to $5,000) to avoid legal action, depending on the employer’s compliance history.
Penalties for Employees
Withholding of Final Payments. Employers are required to withhold all payments due to the employee (salary, bonuses, allowances) until tax clearance is obtained. This can delay the employee's final compensation.
Travel Restrictions. Employees may face travel restrictions if their tax clearance is not completed before their departure. They may not leave Singapore until all tax liabilities are settled.
What are common mistakes in filing?
- Incorrect Reporting of Income:
- Mistake: Reporting the total income for the year instead of breaking it down by calendar year.
- Correction: Report the employee's income separately for each calendar year.
- Failure to Withhold Monies:
- Mistake: Not withholding any final payments due to the employee, especially if they resign on payday.
- Correction: Withhold all payments until tax clearance is confirmed.
- Late Submission:
- Mistake: Filing Form IR21 after the employee has already left Singapore.
- Correction: Submit the form at least one month before the employee’s departure.
- Misunderstanding of Tax Borne by Employer
- Mistake: Employers may mistakenly indicate "Income Tax Borne by Employer" when they have withheld remuneration for tax clearance.
- Correction: Tax is considered borne by the employer only if the employer pays the employee's tax liability directly. If the tax is withheld from the employee's remuneration, it should not be reported as borne by the employer [1]
- Incomplete Reporting of Taxable Income:
- Mistake: Neglecting to report all taxable income, such as unexercised stock options or bonuses.
- Correction: Ensure all taxable earnings are fully reported.
- Not Providing Required Explanations:
- Mistake: Failing to explain if less than one month's notice is given for the employee's departure.
- Correction: Provide a reason if notice is shorter than required.
- Incorrect Employee Details:
- Mistake: Entering incorrect personal information, such as the employee’s name or identification number.
- Correction: Double-check all personal details for accuracy.
- Neglecting Additional Documentation:
- Mistake: Not attaching necessary supporting documents or reports.
- Correction: Include any required additional documentation, like Year-to-Date Payroll Reports.
- Assuming No Tax Clearance is Needed:
- Mistake: Believing tax clearance isn’t necessary for employees on overseas assignments or extended absences.
- Correction: Always file Form IR21 regardless of the employee's future plans.
What are the key considerations for withholding employee payments?
Employers are required to withhold all payments due to an employee from the moment they are notified of the employee's intention to cease employment or when they notify the employee of termination.
Withholding should commence immediately upon notification of cessation, ensuring that all applicable payments are accounted for until tax clearance is confirmed.
What types of payments must be withheld for tax clearance?
- Salary: Regular monthly salary payments.
- Overtime Pay: Any additional earnings for hours worked beyond the standard work schedule.
- Leave Pay: Payments for unused leave days.
- Allowances and Reimbursements: Any allowances (e.g., travel, housing) and reimbursements owed.
- Gratuities and Lump Sum Payments: Any bonuses or lump sum payments that may be due.
What should an employer do if they cannot withhold all monies?
State Reasons on Form IR21. If an employer cannot withhold the full amount due to the employee, they must clearly state the reasons in Form IR21. This documentation is crucial as it may affect tax liability.
Can employers withhold a portion of the employee’s monthly salary for tax clearance purposes?
Employers cannot deduct smaller amounts from regular salary payments over time to save up for tax clearance. Instead, they must withhold the entire amount owed at the time of cessation.
What happens after filing IR21?
Processing by IRAS: Once the Form IR21 is submitted, the Inland Revenue Authority of Singapore (IRAS) will begin processing the form. This includes reviewing the information provided and determining the tax liabilities of the employee.
Request for Additional Information: If the information submitted is incomplete or requires clarification, IRAS may contact the employer for additional details. This can delay the processing time.
How long does IRAS take to process the IR21 form?
General Processing Time: Most Forms IR21 are processed within 21 days. However, e-filed forms are processed faster than paper forms. Approximately 80% of e-filed forms are processed within 7 working days, while paper forms may take longer.
How can an employer check the status of tax clearance?
- myTax Portal: Employers can check the status of their tax clearance by logging into the myTax Portal. This online platform provides updates on the processing status of Form IR21 and any subsequent actions required.
- Follow-Up: If there are concerns about the status or if the processing time exceeds the expected duration, employers can contact IRAS directly for assistance.
What documents are issued by IRAS after tax clearance?
- Directive to Pay Tax: This document informs the employer of the amount of tax that needs to be remitted to IRAS. Payment must be made within 10 days from the date of this directive.
- Notification to Release Monies: This document allows the employer to release the withheld payments to the employee. However, if an Amended or Additional Form IR21 has been submitted, the employer should wait for another Clearance Directive before releasing any withheld funds.
- Electronic Copy: An electronic copy of the Clearance Directive will also be available on the myTax Portal within three working days from the date the Form IR21 is processed.
What are the different modes of filing Form IR21?
In Singapore, employers have two primary modes for filing Form IR21 for tax clearance: e-filing and paper filing.
Different Modes of Filing Form IR21
- E-Filing via myTax Portal: Employers can file Form IR21 electronically using the myTax Portal, which requires a Singpass or a Singpass Foreign User Account (SFA).
- Paper Filing: Employers can also download the Form IR21, fill it out manually, and submit it by post to the Inland Revenue Authority of Singapore (IRAS).
How can employers submit Form IR21 electronically?
To submit Form IR21 electronically, employers should follow these steps:
- Access myTax Portal: Log in to the myTax Portal using your Singpass or SFA.
- Complete the Form: Fill out the required fields in Form IR21, ensuring all necessary information is accurate and complete.
- Attach Supporting Documents: If applicable, attach any relevant appendices or supporting documents as required.
- Submit the Form: After reviewing the information, submit the form electronically. An acknowledgment page will be displayed upon successful submission, confirming that the form has been filed
How does the paper filing process work?
For paper filing, employers should follow these steps:
- Download the Form: Download the Form IR21 from the IRAS website in either Word or PDF format.
- Complete the Form: Fill out the form manually, ensuring all required information is provided.
- Mail the Form: Send the completed form to the following address: Inland Revenue Authority of Singapore, 55 Newton Road, Singapore 307987.
- Await Processing: After submission, employers will need to wait for IRAS to process the form, which can take up to 21 days for paper submissions.
What are the advantages of e-filing over paper filing?
Method | Processing Time | Advantages | Steps |
---|---|---|---|
e-Filing | 7 working days | Immediate acknowledgment, Faster processing | Log into myTax Portal > Fill Form IR21 > Submit electronically |
Paper Filing | 21 days | Suitable for manual documentation | Download Form IR21 > Mail it to IRAS |
E-filing offers several advantages compared to paper filing:
- Immediate Acknowledgment: Employers receive an immediate acknowledgment upon successful e-filing, providing confirmation that the submission has been received.
- Faster Processing: E-filed forms are generally processed faster, with about 80% being processed within 7 working days, compared to the longer processing time for paper forms, which can take up to 21 days.
- Convenience: Employers can access the myTax Portal anytime and anywhere, making it easier to file forms without the need for physical paperwork.
- Online Status Tracking: Employers can easily check the status of their tax clearance online through the myTax Portal, allowing for better tracking and management of submissions.
How should an employer handle tax clearance for share options or share awards?
Employee has unexercised share options or unvested share awards.
These options or awards are not yet realized for tax purposes.
The unexercised options are deemed exercised.
Tax is applied on the deemed gains even if the employee has not sold the shares.
When handling tax clearance for share options or share awards in Singapore, employers must follow specific guidelines to ensure compliance with tax regulations. Here’s a detailed overview of how to manage this process, including the “deemed exercise” rule for unexercised share options and how to report share gains in Form IR21.
- Handling Tax Clearance for Share Options or Share Awards
Employers must take the following steps when dealing with tax clearance for share options or share awards:
- Determine the Status of Share Options/Awards: Assess whether the employee has any unexercised share options or unvested share awards at the time of their departure or cessation of employment.
- Apply the Deemed Exercise Rule: If the employee has unexercised share options or unvested share awards, they will be deemed to have derived gains from these options or awards at the point of tax clearance. This applies even if the employee has not exercised the options or if there are selling restrictions in place.
- Withhold Payments: Employers are required to withhold all payments due to the employee, including any amounts related to share options or awards, from the date they are aware of the employee's impending departure.
What is the “deemed exercise” rule for unexercised share options?
The “deemed exercise” rule stipulates that:
- Gains from Unexercised Options: Employees are considered to have derived gains from their unexercised share options or unvested share awards at the point of tax clearance. This means that even if the employee has not exercised their options, they are still liable for tax on the deemed gains.
- Application of the Rule: This rule applies to all employees who have unexercised share options or unvested share awards at the time of their cessation of employment or departure from Singapore, regardless of any restrictions on selling the shares.
How should employers report share gains in Form IR21?
When reporting share gains in Form IR21, employers should follow these guidelines:
- Complete Appendix 2: Employers must report the deemed gains from unexercised share options or unvested share awards in Appendix 2 of Form IR21. This appendix is specifically designed for reporting such gains.
- Attach Appendix to Form IR21: When e-filing Form IR21, employers should complete Appendix 2 and attach it as part of the submission. This ensures that IRAS has all the necessary information to assess the employee's tax liabilities accurately.
- Include All Relevant Information: Ensure that all relevant details regarding the share options or awards, including the number of options, the exercise price, and the market value at the time of tax clearance, are accurately reported in the form.
What are the payment options for clearance tax?
Payment Method | Steps | Limitations |
---|---|---|
AXS e-Station | Log in to myTax Portal > Choose "Pay Taxes" > Complete payment via AXS | Payment limit of $9,999.99 |
Internet Banking | Log into bank > Select tax payment > Enter details | Requires accurate tax reference |
In Singapore, employers have several options for paying clearance taxes, including AXS, Internet banking, and Telegraphic Transfer. Here’s a detailed overview of each payment method and what to do if an employer objects to the tax assessed but still needs to pay.
How can employers pay clearance taxes via AXS, Internet banking, or Telegraphic Transfer?
AXS
- How to Pay: Employers can pay clearance taxes through AXS e-Station or AXS m-Station (mobile app). To make a payment:
- Log in to the myTax Portal using Singpass or Corppass.
- Select "Pay Taxes" and choose the relevant tax type.
- Proceed to AXS and follow the prompts to complete the payment.
- Payment Limit: Note that there is a payment limit of $9,999.99 when using a credit card on AXS.
Internet Banking
- How to Pay: Employers can also use Internet banking to pay clearance taxes. This typically involves:
- Logging into the employer's Internet banking account.
- Selecting the option to make a tax payment.
- Entering the necessary details, including the tax reference number and the amount due.
- Direct Payment: Ensure that the payment is made directly to the Inland Revenue Authority of Singapore (IRAS).
Telegraphic Transfer
- How to Pay: For international payments, employers can use Telegraphic Transfer (TT). The process generally includes:
- Visiting the bank to initiate a TT.
- Providing the bank with the necessary details, including IRAS's bank account information and the payment reference.
- Important Note: Ensure that the payment is made in Singapore dollars and that all relevant details are accurately provided to avoid delays.
What happens if an employer objects to the tax assessed but still needs to pay?
Obligation to Pay: If an employer disagrees with the tax assessed by IRAS, they are still required to make the payment by the due date. This is crucial to avoid penalties and interest charges on late payments.
Filing an Objection: Employers can file an objection against the tax assessment with IRAS. However, this objection does not exempt them from the obligation to pay the assessed tax while the objection is being processed.
How can an employer amend or withdraw Form IR21?
Employers in Singapore may need to amend or withdraw Form IR21 for various reasons, such as correcting errors or changes in the employee's circumstances. Here’s a detailed guide on how to do this, including the process for filing an amended Form IR21 and the information required to withdraw a submission.
What is the process for filing an Amended Form IR21?
Determine the Need for Amendment: Identify the specific errors or changes that necessitate the amendment of the original Form IR21.
Complete an Amended Form IR21: Fill out a new Form IR21, clearly indicating that it is an amended submission. Ensure that all relevant information is accurate and reflects the necessary changes.
Submit the Amended Form:
- E-Filing: If you are e-filing, log in to the myTax Portal and submit the amended form electronically.
- Paper Filing: If you are submitting a paper form, print and send the amended Form IR21 to IRAS at the appropriate address.
Include Supporting Documents: If applicable, attach any supporting documents that justify the amendments made to the form.
What information is needed to withdraw a Form IR21 submission?
If an employer decides to withdraw a previously submitted Form IR21, they must provide the following information to IRAS via email:
- Employee's Tax Reference Number: This is essential for identifying the specific employee's tax records.
- Reason for Withdrawing: Clearly state the reason for the withdrawal of the Form IR21.
- Confirmation of Employment Status: Confirm that there is no break in the employee's employment from the "Date of Cessation/Overseas Posting" reported in the original Form IR21.
What are the roles of Preparers and Approvers in filing Form IR21?
Preparer
- Responsibility: The Preparer is primarily responsible for gathering and entering all necessary information into Form IR21. This includes:
- Collecting employee details, employment records, and income details.
- Ensuring that the information is complete and accurate before submission.
- Drafting: The Preparer can save the form as a draft if they are unable to complete it in one session, allowing them to return and make amendments later.
- Revisions: If changes are needed after the Approver has reviewed the form, the Preparer can make those revisions upon the Approver's request.
Approver
- Responsibility: The Approver has the fiduciary responsibility to review and authorize the Form IR21 submitted by the Preparer. Their key duties include:
- Verifying the legitimacy and accuracy of the information provided by the Preparer.
- Ensuring that all necessary documentation is attached and that the form complies with tax regulations.
- Final Submission: The Approver is the one who ultimately submits the form to IRAS. They must ensure that the filing is completed correctly before clicking the "Submit" button.
- Authority: The Approver must have the appropriate knowledge and authority to authorize the filing, making them accountable for the information submitted
What is the difference between a Preparer and an Approver in the e-filing system?
Function:
- The Preparer focuses on data entry and ensuring the form is ready for submission, while the Approver is responsible for reviewing and authorizing the submission.
Access Rights:
- Preparers can draft and edit the form, but they cannot submit it without the Approver's authorization. Approvers have the final say and can submit the form to IRAS.
Interaction:
The Preparer may need to interact with the Approver to clarify any discrepancies or make necessary changes based on the Approver's feedback. The Approver, in turn, must communicate any issues or concerns regarding the form back to the Preparer.