Tax Clearance for Foreign & SPR Employees (IR21): A Guide for Employers

When a non-citizen employee leaves your company or the country, it is mandatory to perform tax clearance via Form IR21. This process is mandatory and crucial for two reasons: 

1. It ensures the employee settles all their income tax obligations with the Inland Revenue Authority of Singapore (IRAS)
2. It legally protects your company from liability for any unpaid taxes.

This comprehensive guide is designed to serve as your definitive resource about IR21 filing in Singapore. We will cover the basics from topics such as what is IR21, what are your obligations as an employer, and how to file a tax clearance for your non-resident employees. 

Understanding IR21 Tax Clearance in Singapore

Form IR21 is the official Tax Clearance Form that an employer must file with IRAS to report an employee’s total employment income up to their date of cessation or departure. It is essentially a formal request for IRAS to assess the employee’s final tax liability. It’s key purpose is two-fold: 

• For employers: to settle the employee’s tax liability using withheld funds
• For employees: to confirm a clear tax standing before departure.  

When is IR21 Tax Clearance Required?

You are required to file Form IR21 when your non-Singapore Citizen employee (including an SPR) falls under any of the following scenarios:

• The employee ceases employment with your company in Singapore (e.g., resignation or termination).
• The employee is starting an overseas posting (even if they remain employed by you).
• The employee plans to leave Singapore for a continuous period exceeding three months.
• A Singapore Permanent Resident (SPR) is leaving Singapore permanently.
• Other specific scenarios, such as the company undergoing restructuring or liquidation, resulting in the termination of the employee’s employment.

Who is Exempt from IR21 Filing?

While tax clearance is mandatory in most cases, IRAS provides specific exemptions. If your employee meets all conditions in any of the categories below, you are not required to file Form IR21:

Exemption Scenario	Employee Criteria	Conditions & Exclusions
Short Employment Period	Non-citizen employees who worked for 60 days or less in a calendar year.	Does not apply to company directors, public entertainers, or professionals.
Low Annual Income	Non-citizen employees who worked for 183 days or more in a calendar year.	The employee’s annual income must be less than S$21,000.
Internal Transfer (Local)	The employee is transferred to another company within the same group in Singapore due to restructuring or merger.	You must notify IRAS via myTax Mail and ensure all income is reported via Form IR8A by 1 March of the following year.
Overseas Posting (Temporary)	The employee is going on an overseas posting for less than six months.	The work overseas must be incidental to their Singapore employment. A Letter of Undertaking (LOU) should be obtained from the employee confirming they will not leave Singapore permanently.
Singapore Citizens/Non-Leaving SPRs	Singapore Citizens or SPRs who do not intend to leave Singapore permanently.	If an SPR is leaving permanently, IR21 is required.

What are Your Responsibilities as an Employer when Filing IR21?

Your responsibilities in the IR21 process are divided into three main phases: Filing, Withholding Monies, and Follow-up Actions.

1. Filing Form IR21

The most critical deadline is giving IRAS sufficient notice. You must file Form IR21 at least one month before the earliest of the following dates:

1. The employee’s last day of employment.
2. The date they commence their overseas posting.
3. The date they leave Singapore for a continuous period exceeding three months.

If you cannot provide one month’s notice (e.g., in the case of urgent resignation), you must provide the reason in the Form IR21 submission. Failure to file on time without a valid reason may lead to a fine of up to S$5,000.

You must provide accurate and complete employee income information up to the date of cessation or departure. This includes:

• Basic Salary, Allowances, and Benefits-in-Kind (e.g., housing, car benefits).
• Bonuses, Overtime Pay, and payment in lieu of notice.
• Leave Pay: Any pay for unconsumed annual leave.
• Lump Sum Payments: Including gratuities for past services.
• Employee Share Options/Awards (ESOP/ESOW) Gains 

2. Withholding Monies and Managing Employee Payments

This is your most immediate and serious responsibility upon becoming aware of the employee’s impending departure. You must withhold all monies due to the employee from the date you are aware of their cessation/departure. This includes:

• Salary
• Overtime pay
• Allowances
• Commissions
• Bonuses
• Leave pay
• Lump sum payments (e.g., gratuities)
• Reimbursements

You must not release any of the withheld funds until you have received the official Clearance Directive from IRAS. The funds should be withheld until the Clearance Directive is issued, or for 30 days from the day Form IR21 was filed, whichever is earlier.

3. Clearance Directive and Follow-up Actions

Once IRAS processes the tax clearance, they will issue a Clearance Directive via the myTax Portal. This is your cue for the next steps.

The two possible outcomes are:

Directive Type	Meaning	Your Required Action	Deadline
Directive to Pay Tax	The employee has a tax liability (unpaid tax).	You must remit the tax amount specified in the Directive to IRAS from the withheld monies.	Within 10 days from the date of the Directive.
Notification to Release Monies	The employee’s tax is cleared or the tax liability is less than the amount withheld.	You are approved to release the remaining balance (if any) to the employee.	Immediately upon receiving the Directive.

If you fail to remit the tax specified in the Directive to Pay Tax to IRAS by the deadline, a 5% late payment penalty will be imposed, followed by additional monthly penalties if the tax remains outstanding.

The Best Way to File IR21 in Singapore

Tax clearance is a fundamental aspect of employment compliance in Singapore, especially if you are employing expats and non-Singaporeans. To help you seamlessly file IR21 for your employees, Emerhub provides expert end-to-end tax clearance services. Here’s how we can help you:

• Manage the entire IR21 filing process on your behalf. We will prepare accurate Form IR21 and related documents, and submit them electronically through IRAS myTax Portal. 
• Together with our payroll and HR functions, Emerhub helps ensure withholding of monies (final salary, bonuses, leave pay) is handled correctly pending tax clearance. 
• Maintains organized records of all IR21 filings, clearance directives, and tax payments for audit purposes. We also follow up with IRAS on behalf of the business if there are any queries or issues during the clearance process.
• If you have multiple types of foreign employees under your payroll, postings abroad, or restructuring scenarios, Emerhub offers customized advice and support to navigate complex IR21 requirements, exemptions, and tax residency implications efficiently.

With a strong local presence in Singapore backed by a network of tax agents, legal advisors, and payroll specialists, Emerhub offers comprehensive support that reduces risks, saves time, and ensures the smooth handling of IR21 tax clearance.

Schedule a free consultation with one of our local experts in Singapore. Fill out the form below!