Withholding tax in Singapore

If you are a non-resident company or individual based in Singapore, you must consider another tax which is called “withholding tax” apart from corporate income tax and individual income tax.

What is withholding tax?

It is known as tax deduction at source in other countries. In fact, withholding tax is charged on income of a non-resident company and individual which is derived from Singaporean sources, for services provided or work done in Singapore. This tax will be paid to the Inland Revenue Authority of Singapore (IRAS).

Note: a Singapore company paying a non-resident company or individual for services carried on Singapore has to keep a percentage of that payment to pay to IRAS. (how much percentage is depended on kinds of services)

For determining a company and individual tax residence status in Singapore, please read information below:

A non-resident company is:

  • Incorporated outside Singapore but carrying out business activities in Singapore
  • Incorporated in Singapore but it is managed and controlled outside Singapore

A non-resident individual is:

  • Working less than 183 days in Singapore

Which situations does Singapore withholding tax apply?

This tax is applied for non-resident companies and individuals based in Singapore in cases:

  • Income derived from a Singaporean source
  • Services provided or work done in Singapore
  • Specific types of payments

Payments are subject to withholding tax

 

Nature of Income

Tax Rate

Interests, commissions and any other depts – or loan related to fees 15%
Royalty, rights of use or other lump sum payments for the use of moveable properties 10%
Rent or other payments for the use of moveable properties 15%
Management fees Prevailing Corporate Tax rate
Technical assistance and service fees Prevailing Corporate Tax rate
Services rendered Prevailing Corporate Tax rate

Payments are NOT subject to withholding tax

  • Dividend Payments
  • Payments to Singapore Branches of Non-Resident Companies

Effect from 21 Feb 2014 based in Budget 2014, payments such as interest, commission, royalties or management fees made to Singapore branches of non-resident companies will be not taxed to withhold.

  • Payments Made by Banks, Finance Companies and Certain Approved Entities

To facilitate access to a wider range of funding sources for the lending business of specified entities and to strengthen our position as a regional funding centre, payments made by banks, finance companies and certain approved entities to specified entities are exempted from withholding tax.

  • Payments for the Charter of Ships

According to Budget 2012, withholding tax exemption has been granted on payments made to non-residents, excluding permanent establishments in Singapore, for bareboat, voyage and time charters of ships. The exemption applies to charter fees which are due and payable on or after 17 Feb 2012.

  • Other Payments Exempt from Withholding Tax

– Payments for Satellite Capacity

– Payments for the Use of International Submarine Cable Capacity, Including Payments for Indefeasible Rights of Use (IRUs)

The exemption does not apply to payments which are:

  1. Treated as income earned by any trade or business carried on or exercised by a non-resident person in Singapore; or
  2. Effectively connected with a permanent establishment in Singapore.

For any questions related to withholding tax, contact us for a free consultancy.

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