Understanding Form IR21

IR21 FormContrary to what some might think, Form IR21 isn’t an annual requirement. It applies only when a foreign employee (including Singapore Permanent Residents) leaves Singapore for more than three months, takes up an overseas contract, or exits your company.

In these cases, the Inland Revenue Authority of Singapore (IRAS) requires you to complete Form IR21 in order to get tax clearance for the employee departing. As part of the process, it is also important to hold back any money due to the employee for taxation.

In essence, IR21 is a tax clearance method for Work Pass holders who are leaving their local jobs, and their employers are trusted with filing the form and getting the clearance.

 

Why Is Form IR21 Important?

The IR21 stands as Singapore’s strategy to crack down on international tax dodgers. It makes it challenging for any foreign employee to leave Singapore while still owing taxes by placing the responsibility for tax clearance on the employers.

Under Singapore law, employers must inform IRAS through the IR21 form at least a month prior to their employees’ departure. Once IRAS has given clearance, the employers can then release the money that was previously withheld.

 

When and How to File Form IR21?

IRAS mandates the submission of the IR21 form at least one month before your employee departs.

The general procedure goes like this:

  • You can opt to fill and submit the IR21 form online via IRAS’s myTaxPortal for a quicker tax clearance process. You just need to log in with your company’s CorpPass.
  • Once logged in, record your employee’s earnings for the departing year.
  • At the same time, withhold all overdue payments for your employee. This could include lump-sum amounts, allowances, leave pay, overtime, and more.
  • After applying, permit about seven working days for IRAS to process the e-filed IR21.
  • For physical forms, the processing would take about 21 days.
  • Around three business days following the IRAS form processing, you’ll receive a tax Clearance Directive through myTax Portal. A mailed version of the directive should arrive in approximately five to seven business days.
  • If the Clearance Directive turns out to be a Directive to Pay Tax, you have ten days to send the funds to IRAS. If you get a Notification to Release Monies, you are free to settle the remaining payments to your employee.