Guide To Singapore’s Withholding Tax Regimen
This page aims to provide a broad overview of how Singapore’s withholding tax rules function and apply to both individuals and companies.
Also known as tax deduction at source in other territories, withholding tax is applicable on certain payments made to non-resident companies and individuals. This tax applies when the non-resident has derived income from a Singapore source for work done or services rendered in Singapore. When the non-resident is paid by a Singapore company or individual, a portion of that payment is retained or withheld by the company or individual to be paid to the Inland Revenue Authority of Singapore (IRAS). This is where the term withholding tax originates from. Payments made to Singapore resident individuals and resident companies are not eligible for withholding tax.
Withholding tax in brief
There are four basic questions that can help to determine whether withholding tax is applicable on a payment:
- Did the recipient derive the income from a Singapore source? Income from a source outside Singapore is ineligible for withholding tax.
- Is the party receiving the payment a Singapore resident? Usually applicable to payments made to non-Singapore resident entities.
- Was the service rendered or the work performed in Singapore? Only payments made for services or work provided in Singapore are eligible.
- What was the specific nature (type) of the payment? Only certain types of payments are eligible.
Application for non-resident companies
A non-resident company for tax purposes is defined as one that is either incorporated in a foreign country, or is incorporated in Singapore but is treated for tax purposes as a non-resident.
To be considered tax resident in Singapore, the control and management of a domestically-registered company’s business activities must be conducted within Singapore. If the company is managed from outside Singapore it is considered to be non-resident. IRAS provides the example of a Singapore branch of a foreign company, treated as non-resident as it is managed by the foreign-based parent company.
Only certain types of payments made to non-resident companies attract withholding tax. These are:
- Commission, interest, or any fee paid in connection with any indebtedness or loan – e.g. if a company is charged interest on overdue trade accounts and interest on credit terms paid to a supplier not resident in Singapore, withholding tax will apply. You will also be required to pay withholding tax on any fees that have arisen as a result of commission or loan that are paid to a non-resident individual or company. Withholding tax is only relevant for transactions relevant to business deemed to have taken place in Singapore. The withholding tax rate for these kinds of payments is 10 per cent.
- Royalty or any similar payments made for the use of or the right to use any movably property – all royalties due to a non-resident company are subject to a withholding tax, calculated at either a certain percentage or at the prevailing corporate rate. Payments made for the exploitation of scientific, technical, industrial or commercial knowledge for business activities, or for the hiring of a foreign expert to utilise these skills for your company’s benefit, also attract withholding tax. The tax rate for these payments is 10 per cent.
- Management fees – With respect to applicable Double Taxation Agreements and whether or not the company is considered to be permanently established within Singapore, withholding tax may apply on fees paid to foreign entities that either assist with the management of your business or provide management services under certain circumstances. Withholding tax is calculated at the prevailing corporate rate.
- Services rendered – Withholding tax will be applied where a non-resident company is hired to provide services such as technical support, consultancy, training, or the installation of equipment, or any other work taking place in Singapore. This extends to any monthly allowance paid to employees of the non-resident company involved in the work. If services are provided remotely over the Internet, then you do not have to withhold payment for tax purposes as withholding tax is only applied for work done within Singapore. Tax is calculated at the prevailing corporate rate.
- Rent – Any rent paid for the use of movable property leased to you by a non-resident company is subject to withholding tax at a rate of 15 per cent.
Application for non-resident professionals
Non-resident professionals (NRPs) are defined as people who have spent fewer than 183 days of a year within Singapore while providing services in Singapore. Withholding tax applies to any fee paid to an NRP for any type of service, consultancy or work. NRPs are defined as including:
- Any foreign professional, specialist or expert invited by private organisations, government bodies or statutory boards to provide their technical expertise in Singapore.
- Foreign academics or speakers conducting workshops or seminars
- Queen’s Counsels
- Trainers, consultants and coaches
- Public entertainers
All wages, expenses and fees paid to the NRP are defined as wages. Note that this extends to include airfare, accommodation and any other expenses provide on top of the actual fee for the provision of their services.
Where NRPs are informed prior to payment that their services are to be considered withholding tax-free, then the amount received is considered as a net payment. The Singapore-resident payer is still required to pay withholding tax, and is required to calculate how much is to be provided to IRAS on top of the amount paid to the NRP.
For individuals, withholding tax is calculated at a flat 15 per cent of gross income except where the payment is:
- Either a royalty payment or a payment made for the use of commercial, industrial or technical information or knowledge. In this case the rate is 20 per cent.
- Made to a non-resident company director, applying to all forms of income including salary, bonus, accommodation, gains from stocks or shares, accommodation or any other payment. In this case the rate is 22 per cent.
- Made to a non-resident public entertainer. In this case the rate is 10 per cent until 31 March 2020.
Avoiding double taxation
Singapore has double tax agreements (DTA) with numerous countries in order to protect both individuals and companies from having the same income taxed by both jurisdictions. Where a company operates from a country with a Singaporean tax treaty, this treaty may help relieve the effects of double taxation with respect to the particular service provided and the precise terms of the DTA. For more information, see Ottavia’s guide on Double Tax Treaties.