Guide for Tax Clearance

Tax clearance is the process undertaken by an employer to ensure an employee who is not a citizen of Singapore, decides to quit his/her job and plans to leave the country pays all his taxes before leaving. It is the duty of the employer to inform Inland Revenue Authority of Singapore or IRAS and seek tax clearance for all employees who are leaving the country.

Process of Tax Clearance

If you are a non-citizen employee and need to clear your tax with the IRAS, you will have to file Form IR21, a month before the following:

  • You leave Singapore for a period beyond three months.
  • You start working in a country other than Singapore.
  • You stop working in Singapore.

Step-by-step process for getting tax clearance

1. Check if you require tax clearance

The first step you must take is to know whether you require tax clearance by using the tax clearance calculator. You would not need to go through step 2 to 4 if you do not require this clearance.

2. Provide notification to the IRAS through Form IR21

Give your employer a notice of one month to complete Form IR21. If you fail to give a month’s notice, provide valid reasons for it otherwise the Comptroller will penalise you with a fine of S$1,000. Your employer will get a grace period of 10 days to fulfil the tax filing obligations. Let us now take a look at some tips and pointers relating to notifying the IRAS via Form IR21:

  • If you own company stocks and shares which you have not yet exercised, you will be considered to have made gains from these during tax clearance.
  • Payments made to you for income in-lieu of notice is not exempted from tax.
  • Gratuity payable for past services when the contract expires is not exempted from tax.
  • The severance package that you may get after losing your employment will not be taxable.
  • The employer should ideally include your income details which you earned in the year you left the company as well as the year preceding that when completing Form IR21.
  • Login to ‘my TaxPortal’ using your IRAS PIN or SingPass to e-file Form IR21.

3. Your employer will withhold all payment due until your last working day

Your employer will withhold all your dues that include overtime pay, reimbursements, allowances, leave pay and more from the day you submit your resignation or get terminated. If your employer doesn’t withhold your salary, they may be liable to pay the tax owed.

4. Processing of tax clearance by IRAS

Normally, a major share of e-filed cases will only take a week to get processed. On the other hand, paper filed cases take almost three weeks to get processed. If there are any incomplete information or discrepancies in the information provided in Form IR21, it will take longer for the clearance process to finish. The process may also get delayed if the IRAS needs any clarity on the employment details furnished. The status of the process can be viewed on ‘my TaxPortal’. If changes are required in the original filing, your employer will have to submit another Form IR21.

5. Issuance of Clearance Directive by the IRAS

Your employer will receive a Clearance Directive once the tax clearance process is finished. The status of the process can be viewed on ‘my TaxPortal’. The Clearance Directive will be available on ‘myTaxPortal’ three days from the day Form IR21 is processed. The Directive will inform your employer to release the salary to you or dispatch the taxes calculated to the IRAS in 10 days.

6. Sending the Notice of Assessment to the employee

Once the IR21 form is processed, IRAS will send the tax bill or the Notice of Assessment (NOA) to you. You will have to pay the difference if the amount withheld by your employer is not enough to pay your taxes. You can also check the copy of the NOA via ‘myTax Portal’ using your IRAS Pin or SingPass.

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