While working as an employer in Singapore has its perks, it also attracts a fair share of tax obligations. For instance, when it comes to filing taxes, one of the many forms you should expect to fill out at some point is the IR21. And in case you’re wondering, failure to submit it as stipulated could have you paying hefty penalties
Now, to help you avoid that, this article provides basic insights into the whole IR21 saga. It explains what Form IR21 entails, how it’s tied to the tax clearance process in Singapore, as well as when and how you should file one.
Unlike Form IR8A and the likes, Form IR21 is not a yearly obligation per se. Rather, it only comes into play when your foreign employee (including Singapore Permanent Residents) leaves Singapore for more than three months, takes up an overseas contract, or terminates employment with you.
In such a case, the Inland Revenue Authority of Singapore (IRAS) requires you to seek clearance for the absent employee by filling out Form IR21.
But, that’s not all. While you're at it, you’re further obligated to withhold all the funds that are due to the employee for the sake of tax clearance.
So, all in all, you could say the IR21 is pretty much a tax clearance process for Work Pass holders who happen to leave their local postings. The only thing is, it’s their employer who’s required to file the form and seek clearance.
Form IR21 is basically Singapore’s way of keeping foreign tax defaulters in check. By passing on the tax clearance obligations to the employers, IR21 makes it impossible for any foreign employee to flee the country with a tax bill.
According to Singapore’s law, employers are required to use IR21 to duly notify the Inland Revenue Authority of Singapore at least one month before their employees leave. Subsequently, it’s only after the IRAS clears the employees that their employers can proceed to release the withheld funds.
You don’t have to seek IR21 tax clearance if your employee is:
The IRAS is also considerate enough to exempt employees who are posted overseas provided:
As it turns out, the IRAS requires you to file IR21 at least one month before your employee leaves.
The procedure itself is as follows:
All in all, you need proper record-keeping to effectively manage not just the IR21 tax clearance process, but also all your employees’ income taxes. Don’t fret though - Wealthbridge has got you covered. Contact us to learn how we can help.