In spite of the numerous advantages of doing business in Singapore, there are still several tax regulations that must be met. Many forms must be filled out when it comes to paying taxes, such as IR21, which is one of many documents you should expect to fill out. Failure to submit it on time might result in hefty financial penalties if you are wondering.
As a precautionary measure, this page provides some basic information on the IR21 Form. In this section, you’ll learn about what Form IR21 is, how it relates to Singapore’s tax-clearing process, and when you should or shouldn’t submit one.
Exactly what is the purpose of IR21?
In contrast to other forms, such as the IR8A, the IR21 does not have to be completed every year. When your foreign employee leaves Singapore for more than three months, takes an overseas contract or ceases his or her employment connection with you, this is not applicable.
IRAS requires Form IR21, which must be filled out in order for the absent employee to be granted clearance by the IRAS.
But there’s more to it than that. To guarantee that taxes are paid on time, you must withhold all of the money owing to the employee throughout this procedure.
For Work Pass holders who have to quit their current assignments, IR21 might be seen as a kind of tax clearance process. In contrast, their employer is responsible for completing the paperwork and securing permission.
The IR21 Tax Form’s Importance
For want of a better wording, Singapore’s method to policing foreign tax defaulters is represented by Form IR21. Employees from outside the nation may find it difficult to leave the country if they have an outstanding tax liability since employers must comply with IR21 rules for tax clearance.
At least one month before a worker leaves Singapore, a company must notify the Inland Revenue Authority in Singapore by filling out IR21, according to Singaporean law. Consequently, companies must wait until the IRAS has cleared their employees before releasing any withheld funds.
Form IR21 requirements, such as when and how to submit, must be carefully considered.
But the IRAS mandates you to file an IR21 at least one month before your employee’s departure, so you may want to look into it.
In order to use this method, you must follow these steps:
It may be possible to receive tax clearance by filing the IR21 online. You may do this by login onto IRAS’s myTaxPortal using your company’s CorpPass credentials.
Upon logging in, you should continue to enter your employee’s sales figures for the year prior to his or her departure from the company.
From this point on, you should withhold all of your employee’s overdue payments (which may include gratuities, lump-sum payments, allowances, reimbursements, overtime pay, leave pay, and so on).
The IRAS may take up to seven business days to process the IR21 e-filing you completed. On the other hand, paper-filed forms would take around 21 days to process.
Within three working days of filing your application, you will get a tax clearance directive from the myTax Portal. A postal delivery time of five to seven working days is envisaged for documents sent by the IRAS.
If the Clearance Directive is really a Directive to Pay Tax, you’ll have ten days from the day you get the Directive to Pay Tax to transfer the money to the IRAS. If you get a Notification to Release Monies, it means you have permission to pay the employee.