• +1 347 618 6478
Search
Get A Quote
Tax clearence to be filed for Singapore Employees
  • Home
  • Blog
  • Tax clearence to be filed for Singapore Employees

Table of Contents

blog details

  • 04 Apr 2021

Tax clearence to be filed for Singapore Employees

Tax clearance is a condition for non-Singaporean employees and certain SPRs when they leave their employment, go on overseas posting, or leave Singapore for more than three months. The employer must notify the IRAS and withhold the employee's remaining salary until tax clearance is processed. Failure to comply with tax clearance regulations can incur heavy penalties. This guide covers everything employers and employees need to know about tax clearance in Singapore, from requirements and penalties to filing procedures, and how the IRAS is involved in the process.

Introduction 

Tax clearance allows employees working in Singapore to pay their back tax liabilities before leaving their jobs or from the country. Before an employee can leave an employer or the country, an employer is required to file a form IR21 at IRAS at least one month before the last date of an employee's work and withhold his salary arising on his last day of work. This will prevent employees from leaving without paying their taxes.

Tax clearance is usually needed for:

  • Non-foreign workers who permanently leave Singapore.
  • Employees who are stationed overseas for an extended period.
  • SPRs who terminate their employment and are permanently leaving Singapore.

Understanding tax clearance obligations is therefore crucial since failure to do so attracts penalties and legal consequences.

Requirements for Filing Tax Clearance

  • Tax clearance is required IN cases where the services rendered overseas are not incidental to the Singapore employment. 
  • If you are not a citizen of Singapore you need to file tax clearance as an employee in Singapore.
  • Singapore Permanent Residents (SPR) who are not leaving Singapore permanently after ceasing employment with you.
  • If you reside in Singapore for more than 6 months you need to file tax as an employee.
  • The Singapore employer continues to pay the employee's remuneration during the said period. According to the various scenarios, you need to file for tax clearance.
  • Non-residents of Singapore have to file for clearance after 6 months or more than 1 year.

Penalties for Non-Compliance

  • The penalties for noncompliance are based on the level of negligence and can range from $100 to $50,000 per violation (or per record), with a maximum penalty of $1.5 million per year for violations of an identical provision. 
  • Violations can also carry criminal charges that can result in jail time. 
  • You may surpass Section 155: Penalties can be granted for non-compliance with an s155 Notice. 
  • The Court can impose a fine of up to $21,000 or 2 years imprisonment for individuals, or up to $105,000 for companies.
  • Non-compliance with tax clearance laws is a very serious offense and, therefore, businesses must file in time to avoid legal and financial repercussions.

Steps for Filing Tax Clearance

You may contact the toll-free helpline number of the tax commission at 801-297-2200 or 1-800-662-4335 and may file for the Tax Commission to request a Tax Clearance Application. To receive your customized application for tax clearance. Requested to send application forms from other sources may be denied.

Determine whether Tax Clearance is Required

  • Evaluate if the case of the employee falls within the tax clearance provision.
  • Verify IRAS requirements for particular circumstances that may be applicable.

File Form IR21 to IRAS

  • Submit Form IR21 with IRAS one month before the last day of work for the employee.
  • Submissions can either be online at myTax Portal or through the manual method.

Withhold the Salary of Employee

  • Employers are required to withhold all the payments made to the employee, including bonuses and incentives before IRAS issues a tax clearance directive.

IRAS Process Tax Clearance

  • IRAS will study the documents presented and process the tax clearance application.
  • Employees might be required to pay outstanding taxes before leaving.

Get a Clearance Directive from IRAS

  • After processing, IRAS will issue a directive stating whether the employer is allowed to release the remaining salary.
  • The employee will receive a Notice of Assessment to confirm the settlement of the taxes.

Following all these procedures helps ensure seamless taxation clearance processing without any unnecessary penalties.

Role of IRAS in Tax Clearance

Generally, once your non-Singapore national worker ceases employment with you in Singapore, goes on a far-off posting, or plans to depart Singapore for over 3 months, you want to send word IRAS a minimum of one month ahead and withhold all monies thanks to the worker from the date you're alert to his close surcease of employment or departure from Singapore. This method is understood as tax clearance. 

However, there are some things where tax clearance isn't needed to undergo the subsequent steps to seek out additional.

1. Check out whether Tax Clearance is needed or not

2. Inform IRAS via type IR21

3. Withhold Payment thanks to Your worker

4. IRAS Processes Tax Clearance

5. Receive Clearance Directive from IRAS

6. Worker receives account (Notice of Assessment)

Conclusion

Tax clearance is an essential requirement for compliance upon leaving Singapore or terminating employment. The employer should submit Form IR21 and not make any final payments until cleared by IRAS. Non-compliance would invite heavy penalties and legal repercussions.

Accounts Junction simplifies the tax clearance procedure by offering professional tax and payroll management services. Our expertise will ensure that a business is up to date on Singapore's tax laws, minimizing administrative burdens and risks. To be an employer or employee; understanding tax clearance is essential for easy transitions and security in finance.

FAQs

1. What happens if an employer does not submit tax clearance?

  • Ans: Employers who do not submit tax clearance can be fined SGD 100 to SGD 50,000, and there is also the likelihood of legal action.

2. Can an employee depart Singapore before tax clearance?

  • Ans: Yes, but the employer will need to retain the last salary until IRAS grants clearance. The employee has to settle any outstanding taxes before departure.

3. How does Accounts Junction assist with tax clearance?

  • Ans: Accounts Junction facilitates tax clearance correctly for businesses so that they do not make mistakes or incur penalties while adhering to IRAS regulations.

4. Why should employers opt for Accounts Junction for tax?

  • Ans: Accounts Junction simplifies tax filing by taking care of paperwork, ensuring compliance, and preventing companies from incurring unnecessary fines.

5. Is tax clearance possible online?

  • Ans: Yes, employers can file Form IR21 through IRAS's myTax Portal. Online submission is quicker and more convenient compared to manual filing.

6. Why Should firms choose to deal with accounts junction for taxation purposes?

  • Ans: Accounts Junction provides tax compliance services and payroll management. Our qualified team ensures compliance with IRAS requirements, with a reduced likelihood of penalties arising from noncompliance.
back top