File Form IR21 at least one month before a foreign employee stops working or leaves Singapore, and from the moment you know they are leaving, withhold all the monies you owe them until IRAS issues tax clearance. IR21 is how IRAS recovers any income tax a departing non-citizen still owes.
This guide covers who needs IR21, the timing, what to withhold, and the penalties.
What is IR21 tax clearance?
When a non-Singapore Citizen employee ceases employment or leaves Singapore, you must seek tax clearance by filing Form IR21 with IRAS. Because the employee may leave the country, IRAS needs to settle their income tax before they go — so the law requires you to notify IRAS and hold back their final pay until cleared.
Who needs IR21
Tax clearance applies to non-Singapore Citizen employees: foreigners on work passes, and Permanent Residents who are leaving Singapore permanently. Singapore Citizens are not subject to IR21.
You generally need to file when such an employee:
- ceases employment with you;
- goes on an overseas posting; or
- leaves Singapore for more than three months.
When to file: the one-month rule
File Form IR21 at least one month before the employee's last day, posting, or departure. If you genuinely cannot give one month's notice — for example, an immediate resignation — state the reason in the Form IR21. Confirm the current process on the IRAS IR21 page.
Withholding the employee's monies
From the date you become aware the employee is leaving, withhold all monies due to them, including:
- final salary and overtime,
- leave pay,
- allowances and reimbursements,
- gratuities and any lump-sum payments.
Release the withheld amount only after IRAS issues a clearance directive telling you how much tax to remit and how much to release to the employee.
You cannot deduct a portion of a foreign employee's monthly salary in advance to accumulate a tax-clearance reserve — that is not allowed under the Employment Act. The withholding comes from the final amounts due on cessation.
What happens after you file
IRAS processes the IR21 and issues a clearance directive: it tells you how much of the withheld monies to pay to IRAS for the employee's tax, and how much to release to the employee. Once you have followed the directive, your obligation is complete.
Penalties
Failing to file, or filing late, can attract a fine of up to S$5,000 unless you have a valid reason. If you fail to withhold the employee's monies without a valid reason, you can be held personally liable for the tax that should have been withheld.
How AimmPayroll helps
AimmPayroll generates the IR21 from the employee's payroll record, so the income, CPF and dates carry through from the runs you have already done during the year — alongside the annual IRAS AIS / IR8A filing. Start free for up to three employees.