Withholding Tax Services
When a Singapore company or individual pays a non-resident for services performed in Singapore, a percentage of that payment must be withheld and paid to IRAS, which explains the term withholding tax.
What is Singapore Withholding Tax?
If you’re a non-resident company or individual based in Singapore, you may have to pay withholding tax to the Inland Revenue Authority of Singapore (IRAS).
In Singapore, withholding tax is used to collect taxes from non-resident companies and individuals who earn “Singapore-sourced” income for services provided or work done in Singapore. A percentage of their income is usually “withheld” and the amount sent to the IRAS.
Key facts about Singapore Withholding Tax
Types of Payments Subject to Withholding Tax and the Rates
Through the IRAS, the Singapore government collects withholding tax for the following types of payments:
1. Interest Payments on Loans
Tax Rate: 15%
When an individual or company is changed interest or fees on a loan, the IRAS charges withholding tax. However, the following situations are exempted:
- If the interest is paid to the Singapore branch of an approved non-resident bank.
- If the interest is paid to the Singapore branch of a non-resident company.
- If the interest is paid by approved banks or financial entities for their trade or business.
- If the loan was acquired outside Singapore to purchase immovable assets abroad e.g. land or housing.
2. Payments on Immovable Property
Tax Rate: 15%
When an individual rents movable property, e.g. heavy machinery or vehicles, they have to pay withholding tax on the fees. However, with the intention of encouraging business expansion to overseas markets, this withholding tax is exempted if the movable property was rented for use:
- Outside Singapore for an overseas business trip, trade fairs or exhibitions;
- By an overseas representative office.
3. Payment to Use Knowledge or Information
Tax Rate: 10%
When a payment is made to purchase the right to use knowledge, information or other digital goods, the IRAS levies withholding tax on such payments. This payment applies whether the intellectual property rights are partially or wholly transferred.
However, it is important to note that buying software for use in business operations or for personal use does not constitute the transfer of intellectual property rights, and no withholding tax would be chargeable on such transactions.
4. Payments for Technical Assistance and Services Fees
Tax Rate: 17%
All payments made by an individual to a non-resident company to take care of technical or management services rendered in Singapore are subject to withholding tax at the prevailing corporate tax rate of 17%.
An exception is for example, whereby a non-resident company that provides online services from overseas without sending staff to Singapore. In such a scenario, they would not be subject to withholding tax because they are not rendering services in Singapore.
5. Payments for Services Provided by Individuals
Tax Rate: Varies
Payments made to non-resident professionals, such as counsellors, lawyers, financial consultant, and many others for services rendered in Singapore are also subject to withholding tax of 15%.
Payments made to cater for services by a public entertainer is charged a withholding tax of 10%, if the payment is due between 22 February 2010 and 31 March 2020.
For services rendered by individuals in the capacity of a Board director, a withholding tax of 22% is charged irrespective of whether the director had been physically working in Singapore.
6. Payments for Acquisition of Real Property
Tax Rate: 15%
If an individual in Singapore acquires a real property, such as land or building from a non-resident property trader, the payment is subject to withholding tax.
7. Real Estate Investment Trust (REIT) distributions
Tax Rate: 10%
Withholding tax is also applicable to any distributions by a REIT to a non-resident unit-holder, who is not an individual. A non-individual is someone who does not have a permanent establishment in Singapore, or who did not get the funds to buy the units in REIT from operations carried out in the permanent establishment in Singapore.
Filing and Payment of Withholding Tax
Filing and payment of withholding tax may be made online through the myTaxPortal managed by IRAS. The person paying the withholding tax must first log in with his CorpPass account and file an S45 Form indicating the exact nature of the payment.
Deadline for Withholding Tax Payment
Companies are required to file and pay withholding tax on the 15th of the second month from the date a payment is made to a non-resident. The exact date of payment is determined by:
- The date on the contract
- The date of actual payment
- If there is no contract then the date on the invoice
- The date when the income was credited to the account of the non-resident
Penalties for Late or Non-Tax Payment
If a company missed the deadline to file and pay withholding tax, IRAS will levy a 5% penalty and issue a Demand Note. However, if the withholding tax remains unpaid within 30 days from the due date on the Demand Note, an additional 1% for each month that the tax remains outstanding (up to a maximum of 15 months for a maximum of 15%, amounting to a total penalty of 20%) applies.
Contact us today at [email protected] for assistance in complying with the Singapore withholding tax requirements. You also call us on +65 6100 1026
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