Generally, when a non-Singapore Citizen employee (i.e. foreign or Singapore Permanent Resident employee) ceases employment with the company in Singapore, goes on an overseas posting or plans to leave Singapore for more than three months, the employer is required to seek tax clearance for him/her.

As an employer, you have the responsibility to file the Form IR21 and withhold all monies due to the employee for tax clearance purpose. This applies to all work pass holders including Personalised Employment Pass (PEP) holders. 


If you would like to withhold their salaries for tax, do create any of the following pay items under Payroll > Payroll Settings > Process Payment - Step 2:

  • "Deduction (from Net Salary)" pay item in Ad Hoc Payment / Deduction tab

  • "Deduction (from Net Salary)" pay item in Monthly Payment / Deduction tab

[IMPORTANT] Leave the remarks as "Tax withhold for IR21 clearance".  

Once this deduction has been keyed into payroll with the remark of "IR21" included, we'll automatically pull this amount into your employee's IR21 form under "Amount of monies withheld pending Tax Clearance" section:


Example of Tax Withholding Calculations

Here is a scenario of how the system calculates an employee’s net salary and withholding amounts for tax clearance based on a $5000 basic salary:

Basic Salary

$5,000

CPF Employee

$1,000

Initial Net Salary

$4,000

Tax Withholding

-$4,000

Final Net Salary

$0

Note:

We recommend for the Tax Withholding to be the amount of the Initial Net Salary after CPF deductions so that the Final Net Salary showing in payslips to employees will be a non-negative value.

Upon tax clearance, you will receive either a Directive to Pay Tax or a Notification to Release Monies from IRAS to inform you to release the withheld monies to your employee.


To know more about tax clearance, head over to the IRAS website for more info. Do refer to this link on the applicable withholding tax rates as well.😀

Did this answer your question?