Quick answer: When a foreign employee stops working for you, goes on an overseas posting, or leaves Singapore for more than three months, you must file Form IR21 at least one month before that happens, and withhold all monies due to them from the moment you know it is coming. IRAS processes most forms within 21 days and then issues a Clearance Directive: either a Directive to Pay Tax, which you must pay within 10 days, or a Notification to Release Monies, which lets you pay the employee. Filing late or not at all can mean a fine of up to S$5,000.
Tax clearance is the step that catches employers out at the worst possible moment: the employee has resigned, the last day is in three weeks, and the final payroll run is already scheduled. Miss it and you can end up personally liable for the tax you released.
This guide sets out who needs clearance, the deadlines, the exemptions and the sequence of events. It is written for employers and HR teams hiring on an Employment Pass or S Pass.
What Form IR21 is
Form IR21 is how you notify IRAS that a non-citizen employee is leaving your employment or the country, so that IRAS can work out and collect any tax owed before the person goes. It is separate from the annual Form IR8A.
| Form IR8A | Form IR21 | |
| Purpose | Annual return of employee earnings | Tax clearance when a non-citizen employee ceases employment or leaves |
| When | Every year by 1 March | At least one month before the event |
| Who it covers | All employees | Foreign employees, and SPRs who are leaving Singapore permanently |
| Does the employer withhold pay? | No | Yes, all monies due |
When you must file
File Form IR21 at least one month before any of these:
- the employee ceases employment with you in Singapore
- the employee goes on an overseas posting
- the employee leaves Singapore for more than three months
| Situation | Tax clearance needed? |
| Foreign employee resigns or is terminated | Yes |
| Foreign employee’s contract ends | Yes |
| Foreign employee is posted overseas | Yes |
| SPR employee leaving Singapore permanently | Yes |
| SPR employee staying in Singapore, with a Letter of Undertaking | No |
| SPR employee going on an overseas posting | Yes, the concession does not apply |
| Singapore citizen employee | Generally no |
When tax clearance is not required
IRAS publishes the scenarios. The main ones:
| Scenario | Condition |
| Short stay | The employee worked 60 days or less in the calendar year. This does not apply to board directors, public entertainers, or professionals such as foreign experts, speakers, consultants and trainers |
| Low income, long stay | The employee worked 183 days or more in the calendar year and earned less than S$21,000 for the year |
| Low income over three years | Continuous employment across three consecutive years with income under S$21,000 in each year |
| Internal transfer | The employee is transferred to another company in Singapore because of a merger, takeover, restructuring or posting within the same group. You still have to notify IRAS through myTax Mail so the records are updated |
| SPR staying in Singapore | You hold a Letter of Undertaking from the employee stating they are not leaving Singapore permanently |
IRAS also publishes a tax clearance calculator if you are unsure whether a case qualifies. When in doubt, file.
Withholding the employee’s money
This is the part employers get wrong most often.
- From the moment you are aware the employee is ceasing employment or leaving Singapore, you must withhold all monies due to them. That covers salary, overtime, leave pay, allowances, reimbursements, gratuities and lump sum payments.
- You may not deduct a portion of the monthly salary in advance over the employment period to build up a reserve for tax clearance. The Employment Act does not allow it.
- Release the money only when IRAS tells you to, through a Notification to Release Monies.
How to file and what happens next
| Step | What happens | Timing |
| 1. You learn the employee is leaving | Start withholding all monies due | Immediately |
| 2. File Form IR21 | Through myTax Portal. E-filed forms are processed faster than paper | At least 1 month before the last day or departure |
| 3. IRAS processes the form | Longer if the form is incomplete or IRAS needs clarification | Most within 21 days |
| 4. Clearance Directive is issued | Electronic copy in myTax Portal within 3 working days of processing; the posted copy arrives in 5 to 7 working days | |
| 5a. Directive to Pay Tax | Pay the stated amount to IRAS from the withheld monies | Within 10 days of the directive date |
| 5b. Notification to Release Monies | Release the withheld monies to the employee | As stated in the notification |
| 6. If you filed an Amended or Additional IR21 | Do not release the monies until the new Clearance Directive arrives |
A 5% late payment penalty applies if IRAS does not receive payment by the due date.
Penalties
| Failure | Consequence |
| Late filing or not filing Form IR21 | A fine of up to S$5,000. IRAS may instead offer a composition amount of up to S$5,000 per offence, depending on your compliance record |
| Releasing withheld monies before clearance | You can be held accountable for the tax that should have been paid |
| Late payment of the Directive to Pay Tax | 5% late payment penalty |
How tax clearance fits with cancelling the work pass
Tax clearance runs alongside the MOM side of an exit, and the two have different clocks.
| Task | Who | Timing |
| File Form IR21 | Employer, with IRAS | At least 1 month before the last day or departure |
| Withhold final pay | Employer | From the date you know |
| Cancel the work pass | Employer, with MOM | Within 1 week after the last day of notice, or within 1 week of departure if the person has already left |
| Request a Short-Term Visit Pass if the person needs time in Singapore | Employer, with MOM | At cancellation |
| Buy the return air ticket and arrange repatriation | Employer | Before departure |
| Release final pay | Employer | After IRAS issues the Notification to Release Monies |
Plan backwards from the last day of employment. If you cancel the pass first and file IR21 late, the employee may be waiting overseas for money you cannot legally release yet.
Common mistakes
| Mistake | What happens | Better approach |
| Filing after the last day of work | Late filing exposure, delayed clearance | Diarise IR21 at the resignation, not at the exit interview |
| Paying out the final salary as usual | You may be liable for the unpaid tax | Withhold everything until the directive arrives |
| Assuming SPRs never need clearance | Clearance is required if they leave permanently or go on an overseas posting | Get a Letter of Undertaking only where the employee is genuinely staying |
| Forgetting the 3-month rule | An employee taking a long overseas assignment also triggers clearance | Check the reason for the absence, not just the resignation |
| Releasing monies after an amended filing | Breaches the directive | Wait for the new Clearance Directive |
| Treating IR8A as enough | IR8A is the annual return, not clearance | File both where they apply |
How First Immigration can help
We handle the immigration side of an employee exit, not the tax filing itself. Your accountant or tax agent should handle Form IR21.
- Work pass cancellation within MOM’s deadlines, and the Short-Term Visit Pass request where the person needs time in Singapore.
- Replacement hiring: a new Employment Pass or S Pass application for the role being vacated.
- Retaining the employee instead: if the person is leaving because of a pass problem, we look at whether a renewal, a different pass, or Singapore PR solves it. Our guide to Employment Pass renewal covers the salary thresholds that are rising.
Book a free assessment through our contact page.
Frequently asked questions
What is IR21 in Singapore?
Form IR21 is the tax clearance form employers file with IRAS when a foreign employee, or an SPR leaving Singapore permanently, stops working for them or leaves the country.
When must an employer file Form IR21?
At least one month before the employee ceases employment, goes on an overseas posting, or leaves Singapore for more than three months.
Who needs tax clearance?
Non-citizen employees. Singapore citizens generally do not need it. SPR employees need it if they are leaving Singapore permanently or going on an overseas posting.
When is tax clearance not required?
IRAS lists several scenarios, including employees who worked 60 days or less in the year, those who worked 183 days or more but earned under S$21,000, internal transfers within the same group, and SPR employees who give a Letter of Undertaking that they are not leaving permanently.
How long does IR21 tax clearance take?
Most Forms IR21 are processed within 21 days. The Clearance Directive appears in myTax Portal within 3 working days of processing, and the posted copy arrives within 5 to 7 working days.
What is a Directive to Pay Tax?
It tells the employer how much of the withheld money to remit to IRAS. Payment is due within 10 days of the directive date, and a 5% penalty applies to late payment.
What is a Notification to Release Monies?
It tells the employer that the withheld monies can be paid to the employee.
Can I keep paying the employee’s salary as usual?
No. Once you know the employee is leaving, you must withhold all monies due until IRAS issues a Clearance Directive. You also cannot deduct amounts from monthly salary in advance to build up a reserve.
What is the penalty for not filing IR21?
A fine of up to S$5,000, or a composition amount of up to S$5,000 per offence depending on your compliance record.
Is IR21 the same as IR8A?
No. IR8A is the annual return of an employee’s earnings. IR21 is the tax clearance filing when a non-citizen employee ceases employment or leaves Singapore.
