question on tax clearance

[gocanucks]

hi folks, i know i have posted a lot of questions regarding job change lately, thanks so much for your help, just that i am quite nervous about my current situation, and really don't have any margin for error due to financial and other commitments. I am very new in Singapore and quite inexperienced in terms of over job experience as well. Hoping to be starting my first permanent job.

i have read that before i leave my company, there is the process of tax clearance, i am wondering if this applies to me:

I started at this company mid-october (total work days in tax year is 60+); however, my income in sg in the previous tax year during those 2.5 months is less than $20000. also, i am more nervous as it is stated clearly in my contract that all tax responsibilities are handled by me.

Do I need to worry about the tax clearance issue? I have already submitted my resignation, with slightly more than 1 month notice, but I saw that also some large companies take a really long time to process the documents. my new company is planning for me to start around 5 days after i finish my current contract. as such, do i need to push my current company to take care of any documents?

Thanks again in advance.

[sundaymorningstaple]

If you are on an EP, you company has to file the IR-21 (Tax Clearance), not you. It's filed on your behalf. It's also why you are required to give a minimum of one month's notice. IRAS states that it can take up to a month to get tax clearance if filed manually. However, if they file it electronically online than it will take less than two weeks. What ever taxes that are due, if any, will be deducted from your final salary and you will get whatever is left. By law, the employer MUST withhold any and all salaries from the moment you turn in your notice. This sucks, but that's the way it is. If you haven't received your previous month's salary, you could find yourself without salary a month early until your final check. Again, thems the breaks as that's the law. If you gave over a month's notice and the employer filed electronically, you will have it all buttoned up within two weeks, no problems.

sms

[gocanucks]

hi sms, thanks for the quick reply. i just got paid, and submitted resignation around same time, i am a little worried about april pay though. assuming they will start the ira form, does that mean if it completes before the april pay then there might still be a chance i get paid on time?


also, I was reading on the ira site that all employees should get the tax forms/login, and that if i haven't received it, but earned more than $20000 last year, then I should request for one. But, I didn't earn more than $20000 in the past tax year, so does that mean I don't pay tax for last year, or what exactly happens? If I do need to file tax, how do i go about getting the income tax slips?

[sundaymorningstaple]

If you have been here more than 183 days straddling two tax years you will be taxed a resident rates. If you are taxed at resident rates, then if you earn under 20K +/- you will not owe any taxes. However, if you change employers before you have been here more than 183 days you will be taxed at the flat 15% rate for all of your income. You will then, if you find another job, have to file an amended return in order to get a refund of the back taxes.

Your employer should be, by now, on the auto-inclusion scheme which means that your income should have already been reported. Ask your employer for a copy of the IR8A. If he gives you an IR8A then you need to go to IRAS (Newton MRT) and proceed to fill out your taxes (there are other ways, but what you have shown me so far indicates you need to physically go there). If, on the other hand, you are given an IR8E then the employer has already filed your income with them and it will be taken into consideration when the IR21 is filed. You will possibly get a tax bill for both years at the same time.

As far as getting your april paycheck on time, as long as the employer filed electronically when you resigned, that should be no problem.

sms

[gocanucks]

sms, thanks again so much for the patience and detailed reply.

my exact situation is. i arrived in singapore in early september, started my job in mid october, and now will be leaving mid april at the end of my 6 months contract. so I guess, technically, I would have been here more than 183 days before switching employers. During this entire time, I have made less than $20000 with the company.

[sundaymorningstaple]

Count from the day you arrived in Singapore till your last day of work. If it's over 183 days you are okay and if your total income for the period is okay your tax liability will be zero. (the Tax Clearance asks for the date of arrival as well as the date of commencement and the last day of work). BUT. If it's under 183 days, you will get zapped for a flat 15% of your total wages. So, if you had a 6 month contract and got here a week early you will be okay. The IR-21 should take care of it but make sure you check with your employer that they have filed it. You don't want to be stopped at Immigration I don't think.

[gocanucks]

thanks so much! I will double check with my employer to ensure that they will process the tax clearance on time.

[Nath21]

SMS or anyone I also have a tax clearance question which is more on timing. I am having my last days work on mid april and being paid until end of April with use of leave. I intend to leave before Singapore before my final pay about mid month and I have given 3 months notice since end of Jan.

Will I be able to leave the country permanently as I will have paid my 2010 tax bill just not my YTD 2011 tax bill. The company has notified they will be withholding my final April pay only even though I gave 3 months notice. So they have already broken the law but not my problem. The last month pay would cover the 2011 tax bill. It seems final tax clearance would not happen until 2 weeks post final pay date which means I wouldnt have tax clearance to leave or am I misunderstanding the timing of this process. Is it likely tax clearance will happen 2 weeks after they notified the tax office which should be mid April?

[sundaymorningstaple]

The tax clearance can be filed anytime as long as it's prior to one month remaining. I am not too sure of the strictness of the time requirement re: the withholding of salaries from notice given. They don't really check on the notice so as long as your employer indicate that one month's notice was given, and the final check withheld pending clearance (and ensuring employer files electronically) there shouldn't be any problem. I've actually filed Tax Clearance with as little as two weeks left (short notice) and had it go okay, but there is always a chance the employer could be fined $1000 for late filing but with a good excuse (short notice) they are pretty lenient. In fact, due to the axing of employees (renewals not being granted) we are have a few of them.

Just have the employer file the tax clearance AFTER you receive you next to last check and file (it doesn't actually say it has to be filed 1 month before the employee leaves. It says the employee must give one months notice. But you wouldn't want to put down 3 months notice because then the employer should be withholding 3 month wages as it does state all salaries must be withheld upon giving notice.

The other way around that, if you are on a fixed salary, is to give notice at three months and the employer file the tax clearance immediately projecting the total wages & accrued unused annual leave to be encashed (resignation leave) and file. Again, it will only take two weeks electronically and will only show a deduction of the taxes wherever you and the employer agree it should be deducted. Of course, the employer has to pay the taxes when they get the tax bill, but it's up to them when it's actually deducted (or proportionately across the final three checks?)

If, for some reason, your income should change before the end, they would have to file an additional Tax Clearance though.

In your case, they should file the tax clearance now. It will be back within 2 weeks and the employer can deduct that from your final salary. It's NOT to be filed after you leave. In fact, if you are taking leave (short notice) then it needs to be done asap.

[Nath21]

Thanks I will get things moving asap Monday.

[azg77v]

Hi,

I am tagging along in this thread for tax clearance question.

I am asking the following questions out of interest. Any response is much appreciated.

I understand that IF a foreigner (more than 183 days) is to resign from his/her job and to leave Singapore, the employer will need to submit IR21 for tax clearance and withhold his/her last salary.

I am interested in finding out how tax clearance is calculated. IF he/she is to resign this month, his/her tax clearance calculation would include unpaid taxes for YA 2010 and about 4 months of YA 2011. Is he/she still entitled to the 20% tax rebate for YA 2010 in the tax clearance calculation?

I assume the calculation for 4 months of YA 2011 would be straight forward from the tax rates table. IF next year the budget is announced with another tax rebate, would he/she be entitled to claim a refund?

Thank you very much.

[sundaymorningstaple]

As you are treated as a tax resident if you have been in Singapore more than 183 days, then yes, the tax rebate will be automatically offset when the tax clearance has been filed. You can use the tax calculator on the IRAS website to find out approximately how much your tax bill will be.

Step 2: Your employer notifies IRAS and withhold monies from your payroll

To ensure that you pay all your taxes before you leave Singapore, your employer is required to withhold payment of all monies (including salary, bonus, overtime pay, leave pay, allowances, gratuities, lump sum payments, etc.) due to you from the day you gave notification of your intention to leave the job or depart from Singapore.

Step 6: You will receive the tax bill (Notice of Assessment)

IRAS will send you the tax bill. If the monies withheld from your payroll are not sufficient to pay your taxes, you must settle the difference before departure. If there is outstanding tax, you will be stopped from leaving Singapore. In such instance, you will need a release letter from IRAS.

http://www.iras.gov.sg/irasHome/page.aspx?id=9894

[sundaymorningstaple]

If there is outstanding tax, you will be stopped from leaving Singapore.

Which only goes to further reinforce my earlier contention about the main databases of Singapore being interlinks now. They are gonna catch you at Immigration if you try to abscond with paying your taxes.

[dimbarney]

Thanks for the comments so far. Building on this, I'd really like to know whether immigration would stop me from leaving Singapore to go on a home leave or business trip during my notice period (6 mths) whilst there is still outstanding tax to be paid.

I ask this because I'm contemplating resigning in early-mid October 2011. My employer may need to withold tax for up to 3 months to pay for 1.3 tax years (Jan 2011 to April 2012). However I'm booked to go home (overseas) for Christmas for a few weeks (before returning to Singapore to finish my notice period). It looks like my employer won't be able to collect enough tax from my monthly salary by the time I leave for my home leave.

Do you think that immigration would really stop me leaving? (for all trips I would be able to show them a return ticket back to Singapore).

Maybe I should ask IRAS directly?

Cheers!

[sundaymorningstaple]

If the return trip ticket is a lot less that the potential taxes, you would get off cheap by buying a return ticket wouldn't you? If I can think of that, surely they will as they see it all. And yes they will if the tax due has been calculated and billed. Of course, if you get out before the have calculated your taxes, you only have to worry about being caught sometime in the future transiting through changi, as they may well have copies of incoming flight manifests.....

We don't know what they are capable of for certain, but they are effective and very efficient. In the words of Clint Eastwood.....

Do you feel lucky?