Tax Clearance in Singapore: A Complete Guide 2025

When a non-citizen employee leaves your company or Singapore, there’s more to handle than a final payslip. In Singapore, employers are legally required to ensure tax matters are settled before a foreign or SPR (Singapore Permanent Resident) employee departs — a process known as Tax Clearance.

In 2025, tax clearance compliance remains a key responsibility for businesses, especially those employing foreign professionals. This guide outlines what tax clearance involves, who it applies to, when to file, and how to stay on the right side of the law — without delays or penalties.

What Is Tax Clearance?

Tax Clearance is the process of ensuring that all outstanding taxes are paid before a non-citizen employee:

• Leaves Singapore permanently
  
• Leaves for more than three months
  
• Ends employment
  
• Is posted overseas
  

As the employer, you are required to file Form IR21 with IRAS and withhold any final payments until tax clearance is granted.

Who Needs Tax Clearance?

You must file for tax clearance if your employee is not a Singapore citizen, and they:

• Resign or are terminated
  
• Are posted overseas
  
• Are leaving Singapore for good or for more than three months
  

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Tax Clearance is not required if:

• The employee is a Singapore citizen
  
• They are a Singapore PR who is not leaving the country
  
• They are transferred within the same local group of companies
  
• They are away on short business trips
  
• Their total employment duration is under 60 days in the calendar year (not applicable to company directors or public entertainers).
  

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When to File Form IR21

You must file Form IR21 at least one month before:

• The employee’s final working day, or
  
• The date of departure from Singapore — whichever is earlier
  

Filing early helps avoid processing delays and ensures a smooth departure for your employee.

What You Must Do as the Employer

1. Withhold Final Payment Immediately

Once you know the employee will be leaving or ending employment, you are required to withhold all final payments, including:

• Salaries
  
• Bonuses
  
• Leave encashment
  
• Any other benefits in cash or kind
  

This continues until IRAS issues a tax clearance directive confirming the final tax amount to deduct or indicating no further tax is owed.

2. Submit Form IR21

IR21 can be filed through IRAS’ myTax Portal. You’ll need to provide detailed income information, including fixed and variable components — such as:

• Basic salary
  
• Overtime and bonuses
  
• Benefits-in-kind
  
• Shares or stock options
  

Note: Ensure accurate reporting. IRAS processes e-filed forms typically within 7 working days, but incomplete information may lead to delays or follow-ups.

Penalties for Non-Compliance

Failing to comply with tax clearance obligations can result in:

• A fine of up to $1,000
  
• Personal liability for the unpaid tax
  
• Administrative complications with IRAS and reputational risk
  

Late filing or payment release before clearance can also trigger investigations or disrupt business operations.

What to Keep in Mind for 2025

• e-Filing is now the standard — manual submissions are discouraged.
  
• Ensure payroll systems are up to date, and all income is reported consistently.
  
• Keep track of stock options or deferred payments, as these must be included in tax clearance reporting.
  
• Businesses with foreign employees should have a clear offboarding process that includes tax clearance as a required step.
  

Summary

Tax clearance is a legal obligation, but it’s also an opportunity to ensure your business is managing payroll, taxes, and employee records properly.

With accurate reporting, timely filing, and a solid understanding of IRAS procedures, businesses can avoid delays, penalties, and last-minute scrambling — especially during year-end or workforce transitions.

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