Singapore is home to the world’s rapid growing businesses. With its free market economy policy, low corporate tax rate of 17%, relatively low complexity in executing payroll operations paired with its high standards of living makes this small south Asian country a desirable place for multinational companies to expand their business operations as well as a suitable place for foreign experts to work in.
However, despite the easiness to establish business or secure jobs to take full advantages of the country’s free economy, companies, organizations must first understand the country’s regulations especially when it comes to compliance with tax rules and regulations. To be precise we are going to focus on filing the Employee Tax Clearance Return (Form IR21) - employees’ tax remunerations in Singapore.
For compliance with Singapore tax regulations, the law requires companies, organizations or employers working with foreign experts or employees to file their employee’s tax returns electronically to the IRAS. Employers file this returns on an Employee Tax Clearance Return Form referred to as Form - IR21.
Generally, the obligation to pay taxes clearance returns lies with the employer, not the employees. So, the law requires employers to keep a proper record of their employee’s income tax deductions and remit them to tax regulatory agencies, failure to which they are subject to penalties. To help employers comply with these tax regulations they have set aside tax clearance rules and a comprehensive record keeping guides for help.
Who is affected and when are you required to file tax clearance for the employee?
Usually, the Employee Tax Clearance Returns affects Non- Singapore citizen employees or all work pass holders including those with personalized employment passes. By saying Non- Singapore citizens we refer to a foreigner on a Singapore permanent resident employee. There are varied situations that require you to file tax clearance forms for your foreign employee. They include:
• When the employee ceases employment with you in Singapore.
• When the employee goes on an overseas posting that extends for a period of more than three months or
• When an employee plans to leave Singapore for a period extending for more than three months.
When such situations as arise as an employer the law requires you to seek tax clearance for the employee. The law bestows in employers the responsibility to file the IR21 form and withhold any payments due to the employee for tax clearance. Upon completion of tax clearance, the employer is allowed to release extra monies held to the employee.
The law requires that the employer has to withhold the payments as early as they learn about the cessation of employment or the development of the situations mentioned early. Usually, it is 30 days prior to the date of cessation of employment within Singapore.
If the employer cannot file the tax returns on time, the employer can request for extra time from IRAS by providing an estimate of the taxable income of the employee. An extra time of 2 months is guaranteed mostly when the taxes are borne by the employer. Failure to file the returns with no good reasons attracts a penalty of up to $1000.
Modes of filing form- IR21.
There are only two modes of filing the IR21 forms, these are:
• Filing via e-Filing and
• Through paper filing.
Filing through the e-filing options is the most preferred means. Here you will be required to create an account with the IRAS through their My Tax Portal. The benefits are that you get an immediate notification once you have dully completed the filling process. It is more convenient and faster to file as compared with paper filling. And lastly, you can view the clearance directive and print it on-line. You don’t have to wait for its delivery by post from the tax man.
If you are not comfortable with on-line filing you can opt for paper filing. Here you will need to download the IR21 form on-line. File the returns manually and once you have completed filling post the forms to their postal address below.
Inland Revenue Authority of Singapore
55 Newton Road
Processing takes more than 21 days after which you will receive a tax clearance directive from IRAS by post.