Form IR21 is not a yearly requirement in and of itself. It only applies when a foreign employee (including Singapore Permanent Residents) leaves Singapore for more than three months, accepts an overseas contract, or leaves your company.
In this instance, the Inland Revenue Authority of Singapore (IRAS) needs you to fill out Form IR21 to request clearance for the absent employee.
That’s not all, though. While you are doing it, you should also withhold all monies owed to the employee for tax purposes.
Overall, one may consider the IR21 to be a tax clearing procedure for Work Pass holders who leave their local assignments. The only difference is that their company is responsible for filing the form and obtaining clearance.
Form IR21: Its Significance
Form IR21 is essentially Singapore’s technique of catching international tax evaders. IR21 makes it difficult for any foreign employee to depart the nation with a tax bill by passing on the tax clearance requirements to the employers.
According to Singapore legislation, employers must use IR21 to properly notify IRAS at least one month before their employees leave. Following that, only after the IRAS has cleared the employees can their employers release the money that has been withheld.
When Should You File Form IR21, and How Should You Do It?
The IRAS, it turns out, requires you to file an IR21 form at least one month before your employee departs.
The basic technique is as follows:
- You might choose to fill out and submit the IR21 electronically for faster tax clearance. After signing in with your company’s CorpPass credentials, you can do this through IRAS’s myTaxPortal.
- Once you’ve logged in, you should enter your employee’s earnings for the year of departure.
- In the meanwhile, you should withhold all overdue dues from your employee, including lump-sum payments, gratuities, reimbursements, allowances, leave pay, overtime pay, and so on.
- After applying, allow about seven working days for the IRAS to process the e-filed IR21. Otherwise, processing paper-filed forms would take roughly 21 days.
- Within three working days after the IRAS processes the form, you’ll obtain a tax Clearance Directive via myTax Portal. The IRAS also sends it by mail, which takes roughly five to seven business days to arrive.
- You must remit the monies to IRAS within ten days if the Clearance Directive turns out to be a Directive to Pay Tax. On the other hand, a Notification to Release Monies says you can go ahead and pay the employee’s dues.