IR21 tax clearance: what your employer files when you leave Singapore

If you’re a foreign employee or a Singapore permanent resident (SPR) and your job in Singapore is ending, your employer has to tell IRAS (the Inland Revenue Authority of Singapore) and hold back the money it owes you until IRAS says how much tax to pay from it. This is tax clearance, and the form is the IR21. You don’t file it yourself, but it decides when your final pay arrives. If you’re the HR person filing it, the departure checklist for HR teams covers the employer’s side.

What is tax clearance?

Tax clearance is the IRAS process for employees who aren’t Singapore citizens and who stop working for a Singapore employer, go on an overseas posting, or plan to leave Singapore for more than three months. The employer notifies IRAS on Form IR21 at least one month ahead and withholds all money due to the employee from the date it knows they’re going. IRAS then works out the tax, and the employer pays it from the withheld money.

Filing is your employer’s responsibility. IRAS says tax clearance applies to all work pass holders, including Personalised Employment Pass (PEP) and Overseas Networks & Expertise (ONE) Pass holders.

Does tax clearance apply to you?

It applies if you’re not a Singapore citizen and you’re:

• leaving your job in Singapore,
• starting an overseas posting, or
• leaving Singapore for more than three months.

IRAS lists these cases where tax clearance is not required:

• You’re an SPR who isn’t leaving Singapore permanently. Your employer asks you to sign a Letter of Undertaking instead of filing. This concession doesn’t cover an SPR going on an overseas posting.
• You’re moving to another Singapore company because of a merger, a takeover, or a restructuring or posting within the same group. Your employer notifies IRAS of the transfer instead.
• You’ll be away for three to six months for training, business or an overseas posting. For a posting, you must be returning to the same employer, keep your work pass with them and stay on their payroll, and the overseas work must be incidental to your Singapore job.
• Your employment was short or low-paid: 60 days or less in a calendar year (unless you’re paid as a director, public entertainer or professional), or one of the scenarios where you earned less than S$21,000 a year. These apply only if you had no other Singapore employer in the year you leave or the year before.

When no IR21 is needed, your employer reports your income on Form IR8A or through the Auto-Inclusion Scheme (AIS) by 1 March of the following year. An SPR in that position must file an income tax return if their income for the previous year was over S$22,000, even without a notice from IRAS.

When does your employer have to file?

At least one month before your last day of work, the start of an overseas posting, or a departure of more than three months. The date on the form is your official last day of service. IRAS’s explanatory notes for Form IR21 say it isn’t the work pass cancellation date, and it doesn’t move earlier if you use up your leave before you go.

If you’re put on gardening leave, IRAS says clearance should start at the beginning of it. If your employer can’t give a month’s notice, for example because you resigned with immediate effect, it has to give IRAS the reason on the form.

So give notice as early as you can. IRAS’s guidance for employees makes the same point: it gives your employer time to file, and gives you time to settle your tax before you leave or start a new job.

Why is your final pay being held back?

From the date your employer knows you’re leaving, it must withhold everything due to you: salary, bonus, overtime, leave pay, allowances, gratuities and lump sums. It can’t instead deduct part of each month’s salary to build up a fund, which IRAS says the Employment Act doesn’t allow. If you owe your employer for not serving your full notice, it can offset that against the withheld amount.

IRAS assesses the income your employer reports on the IR21: what you earned this year up to your last day, plus any income from the previous year that hasn’t been assessed yet. Points to know:

• Salary in lieu of notice, and a gratuity for past service paid at the end of a contract, are taxable.
• Unexercised share options and unvested share awards are treated as gains at tax clearance (the “deemed exercise” rule), even with selling restrictions, unless your employer has IRAS approval to track them.
• Severance paid as compensation for loss of office may not be taxable. Your employer gives IRAS the details to review.
• The amount your employer pays IRAS can include unpaid tax from earlier years.

What do you need to do?

• Ask HR whether the IR21 has been filed. IRAS suggests you check.
• Keep your myTax Portal access working. You log in with Singpass or a Singpass Foreign user Account (SFA). Update your mailing and email addresses there so your tax bill reaches you after you’ve gone.
• Pay any shortfall on time. If the withheld money doesn’t cover your tax, pay the rest within seven days of the date of your Statement of Account. Tax clearance ends any GIRO instalment plan, and any deferred tax on share gains, plus interest, becomes due immediately.
• Check your residency status. If you worked in Singapore for fewer than 183 days you may be assessed as a non-resident. If you meet IRAS’s conditions for tax residency, you can ask for a reassessment through Amend Tax Bill on myTax Portal, but you still have to pay the outstanding tax straight away.
• Tell IRAS yourself if your last employer didn’t seek tax clearance for you, by email through myTax Mail or by post.

How long does tax clearance take?

IRAS typically processes an e-filed IR21 within 7 working days and a paper one within 21 days, or longer if information is incomplete or needs clarifying. Your employer then gets a Clearance Directive on myTax Portal within three working days of processing, and by post within five to seven working days.

The directive is one of two kinds:

• Directive to Pay Tax: your employer pays IRAS the stated amount within 10 days of the directive’s date, and releases any balance to you.
• Notification to Release Monies: your employer releases the withheld money to you.

You’ll receive your tax bill (Notice of Assessment) and a Statement of Account showing any balance. If a payment such as a bonus comes later, your employer has to file an Additional or Amended IR21 and hold that payment until IRAS has processed it.

How do you get a refund?

Withheld pay beyond what you owe comes back from your employer once the tax is paid. If an amended tax bill shows you’ve overpaid, IRAS refunds you within 30 days. It pays electronically only: IRAS no longer issues cheques.

IRAS’s advice for foreigners leaving Singapore is to keep an active Singapore-dollar account with a PayNow participating bank and link it to your FIN (foreign identification number) through PayNow. If your bank doesn’t support PayNow FIN, use GIRO or a telegraphic transfer instead. To get the refund before you leave, set this up at least 30 days before departure.

Without one of these, IRAS keeps the refund in your tax account. Refunds under S$100 aren’t sent by telegraphic transfer, and a refund that fails because you’ve closed your account can end up as unclaimed money, so keep the account open until your tax is settled.

What if tax clearance isn’t done?

For your employer, not filing the IR21 by the due date is an offence. IRAS can offer to compound it for up to S$5,000 per offence, or summon the employer to court, where a conviction can mean a fine of up to S$5,000 per offence. An employer that fails to withhold your money without a valid reason may be liable for your tax. A Directive to Pay Tax paid late incurs a 5% penalty, and a further 1% can be added for each completed month it stays unpaid, up to 12%.

For you, IRAS says unpaid tax can lead it to appoint your bank, employer, tenant or lawyer to pay it, to issue a travel restriction order that stops you leaving Singapore until the tax is paid in full, or to take legal action.

A timeline for leavers

Fit these steps into your countdown from three months out.

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