Singapore is a hub for businesses, and being an employer or an employee here comes with its perks that these working individuals can take advantage of. But, along with benefits, there also comes a significant amount of liabilities such as tax liability.
E.g., IR21 is one of the many forms that come into play and needs to be filled at a certain point in time while dealing with filing taxes. Also, not being able to fulfill these legal requirements may lead to fines and additional problems.
We at Odint Consulting are here to tell you exactly what you need to know to be aware of the IR21 form. We will explain what the form does, why, and when you may come across and submit it.
What is IR21?
The IR21 form is not a big obligation that needs to be filled every year. The form is required by an employer.
It comes into use for an employer when one of their foreign employees or employees who are permanent residents in Singapore sign a contract overseas, leave the country for at least more than three months or leave the organization.
When a situation like this occurs, it is the IRAS or Inland Revenue Authority of Singapore that needs the employer to legally seek clearance for the absence of an employee by filing the IR21 form.
Although, that’s not the extent of it all. While an employer fills the IR21 form, he/she is also liable to withhold the monetary funds that are initiated because of the employee in question for tax clearance.
It could be said that the IR21 is more or less a process for tax clearance. It is a process for the holders of Work Pass who somehow have to leave their geographical posting in Singapore. The only catch is that the employer needs to do the filing and seek clearance.
Importance of filing IR21
With the help of IR21, the Singaporean government keeps foreign tax defaulters in check. It makes it impossible for foreign employees who are tax defaulters to flee to their countries without clearing their tax dues.
According to the laws in Singapore, every employer must require IR21 to notify the inland revenue authority of Singapore at least one month before their employees leave.
Who needs to file IR21?
IR21 is mainly for non-resident employees of Singapore. But this includes other individuals also. Except the following categories are required to file IR21 in Singapore as they are only required to submit employee’s employment incomes to IRAS through the form IR8A and AIS (auto inclusion schemes): –
- Citizens of Singapore.
- Permanent residents of Singapore who are not living permanently after the ceasing of their employment.
- Non-Singaporean citizens who:
- Worked for 60 days or less in a calendar year, but Directors of the company, public entertainers, and employment of similar nature have to file IR21.
- Earn less than $21000 annually and stay for 183 days or more in a calendar year? This excludes directors of companies, public entertainers, and employment of similar nature.
- Earn less than $21000 and stay for 3 or more continuous years.
- Are transferred to Singapore because of the merging or taking over of the company, restructuring, or posting with the same group of companies.
Additionally, the IRAS is generous enough to exempt workers who are stationed abroad if:
- The time spent working abroad is no longer than six months.
- The worker is still being paid while on duty abroad by the Singaporean business.
- Throughout the task abroad, the worker keeps a valid work pass issued by their employer, and when they return to Singapore they resume employment with that employer.
When to file IR21?
IR21 is required to file by the categories mentioned above at least one month before the following-
- When employees stop working in Singapore.
- When an employee is going for overseas posting.
- When an employee is leaving Singapore for more than 3 months.
How to file IR21?
IR21 is filled by employers on behalf of their employees 1 month before their departure.
You can file IR21 by following the procedure given below-
- You can file IR21 through online mode by signing in to IRAS’s myTaxPortal with your company’s CorpPass credentials.
- After that, you need to enter the incomes of your employees, which are earned in the year of departure.
- After that, you have to hold all the dues of your employee, such as gratuity payment, leave pays, allowances, etc.
- Now, you can give 7 working days to IRAS for the e-filing of IR21. Otherwise, it would take 21 days for the paper filing of the form.
- Once the IRAS has processed the form, then you will receive a tax clearance directive on myTaxPortal within 3 working days and also through the post, which will take 5 to 7 working days.
When the clearance directive is like a directive to pay tax, then you are required to pay the amount within 10 days to IRAS. And in another case, you will receive a notification and pay all the dues of your employee.
What Are the Ways of Submitting Form IR21?
Only two methods are available for filing Form IR21:
Utilising the options for electronic filing is the preferred strategy. You must use IRAS’s My Tax Portal to sign up with them digitally. Once the filling process has been finished entirely, you will immediately get a notification. E-filing is quicker and more accessible than paper filing. The clearing instruction is available online for review and printing.
You can also file for tax clearance through paper instead. When you are done with filling the form physically, mail them to the address provided below:
Inland Revenue Authority of Singapore
55 Newton Road
You can check the status of tax clearance on IRAS’s My Tax Portal.
Compliances for not filing IR21
When an employee does not file IR21 within a reasonable period without having a valid reason, then he is required to pay $1000 as the fee for late filing or non-filing IR21.
Employers must follow key procedures when workers quit their jobs or depart the country, including filing IR21 in Singapore. It is a mandated by law, which ensures adherence to tax laws and supports effective management regarding worker tax issues. Employers satisfy their duties and help their staff members transfer smoothly by submitting IR21.
Odint Consulting provides you with all the necessary information you need to be financially aware of and carry out your businesses in foreign countries like Singapore.
We can help you with our services around company formation and can also act as a transaction advisory for all kinds of businesses in foreign. We also offer consultation on our website.
The form has to be declared by filling it up online on the myTaxPortal or paper by downloading, then filling the form, sending it to the IRAS.
The form can be filled or downloaded by heading over to the online myTaxPortal on IRAS and signing in with the CorpPass credentials of the company. When in, the employer has to fill in the legal monetary figures of the employee while he/she is away from the local posting.
The TCC or Tax Clearance Certificate is a document issued by SARS acknowledging that an applicant has his/her tax issues in order.
It is required by any Singapore business to render or tender for offering a particular service. The clearance certificate is only valid for a year from the issue date.
Being compliant with tax liabilities is beneficial for any working citizen or a business. It is required to portray a good standing while applying for a foreign investment tender or immigration purposes.