You will be able to list the tax steps when you leave Singapore or take an overseas posting.
Two moves came up in Shu Ting's office in the same month. Her colleague Arjun, the analyst from lesson 1.2, Tax residency and what it changes, accepted a job back in Bengaluru and gave notice. And Shu Ting's boss asked whether she'd consider a two-year posting to run the Jakarta warehouse she had helped set up. Arjun's last pay slip turned out to be smaller than he expected, for reasons nobody had warned him about. Shu Ting, before saying yes or no, wanted to know what a posting would do to her tax.
This lesson covers the tax steps around leaving Singapore or taking an overseas posting. Your exact position depends on your nationality, your dates and the country you go to, so treat it as a checklist of questions to ask.
Lesson 1.2 explained that residency is decided year by year. A move abroad can change it.
A citizen or PR who leaves to live and work abroad may stop being a tax resident for the years they spend mostly outside Singapore. A foreigner who leaves part way through a year may not meet the tests for that year and can be assessed as a non-resident. In a non-resident year, the resident rates and the personal reliefs from module 2 generally don't apply, and IRAS taxes employment income at the non-resident rate or the resident rates, whichever gives more tax, under rules and rates it publishes.
For someone on a posting who keeps a home here and comes back regularly, the answer may be different. IRAS has guidance for Singaporeans working overseas, and it's worth reading before you go.
This is what caught Arjun out. When a non-citizen employee, which means a foreigner or a Singapore PR, stops working for an employer in Singapore, is posted overseas, or leaves Singapore for an extended period, the employer must seek tax clearance from IRAS. The employer files a form, usually the IR21, which reports the employee's income up to the date they leave. IRAS works out any tax owed and tells the employer.
Until clearance is given, the employer must withhold money it owes the employee, such as final salary, bonus or leave pay. If the tax is more than what the employer is holding, the employee has to pay the balance before the clearance is complete.
Arjun's employer had filed the form when he resigned and was holding his final month's salary. Once IRAS assessed his tax for the part year, the employer paid the tax from the money held and released the rest to him. The process had worked as designed. He simply hadn't known it would happen, and he had planned to use that salary for his flight and deposit in Bengaluru.
The timelines for filing and the details of what must be withheld are on the IRAS website. If you're a non-citizen planning to leave, ask HR early when they will file and how much they expect to hold.
Citizens aren't covered by tax clearance. Their employers report income in the usual way, and they file the following year as normal, as long as they have income to declare.
Moving abroad usually brings you into another tax system. The country you move to may tax your salary from the day you start work there, and it may tax worldwide income once you become resident under its own rules. Those rules can be very different from Singapore's: more taxes, different reliefs, and sometimes tax on investment income or gains that Singapore leaves alone.
Lesson 6.1, Foreign income received in Singapore, showed that income from a job carried out wholly overseas is generally not taxed in Singapore. On a posting, that means the host country usually taxes the salary. Where two countries both claim the right to tax the same income, a double taxation agreement may decide between them, which lesson 6.3, Double taxation agreements and foreign tax credits, explains.
A few questions cover most moves.
Which years will you be resident in Singapore, and which in the new country? Does your employer handle tax clearance, and how much pay will it hold back? Will the new country tax your salary, your investment income, or your Singapore rental income if you let your home? Does a tax treaty between the two countries apply? And what happens to your SRS account and your CPF while you're away?
Shu Ting wrote each question down and asked her HR team for the company's posting policy, which included paid tax advice for staff sent abroad. She noted that as a citizen, she wouldn't need tax clearance, but that her Singapore residency for the posting years needed checking, along with how Indonesia would tax her salary there. Because the sums were large, she booked the adviser.
For the activity, write the steps you or your employer would take if you moved overseas next year, for your own nationality and the country you'd be most likely to go to.
Write the steps you or your employer would take if you moved overseas next year.
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