Singapore Withholding Tax: Everything You Need to Know
In this article, we’ll cover everything you need to know about Singapore’s withholding tax, including what it is, who needs to pay it, and more. Whether you’re a business owner, freelancer, or investor, understanding Singapore’s withholding tax is crucial for managing your finances effectively.
What Is Withholding Tax?
These payments could be for services and work performed, or such payments as interests and royalties. Depending on the nature of the payment, the WT rates will vary. The most common types of payments to which WT is applicable are presented in the table below.
Please take note that the listed rates do not apply to non residents which are located in the countries that have comprehensive Double Taxation avoidance Agreements (DTA) with Singapore. Under the DTA, the WT can be substantially lower or none. Please check the existence and provisions of the DTA in relation to the particular nature of payment.
Normal Rates of Withholding Tax in Singapore
For full details, please visit: https://www.iras.gov.sg/taxes/withholding-tax/basics-of-withholding-tax/types-of-payment-and-withholding-tax-rates
Who Is Considered a Non-Resident?
The WT is withheld for payments to non-residents. The criteria of control can be applied to the place where the important decisions are made, or where the board of directors is located. Interestingly enough, this means that even some Singapore-registered companies can be treated as non-residents of Singapore, and this will cause payments to such companies to be subjected to withholding tax.
Payments to Directors
Many companies have foreign directors on their boards, who render services to the company. There may be other people involved in the business who are providing services to the company on an occasional basis. Payments to such individuals, including non-resident company directors are subject to a WT rate of 22%. It covers all types of income, including salaries, director’s fees and bonuses.
However, if a non-resident director is in executive capacity, such as CEO, Chairman of the Board or Managing Director, his remuneration will be exempt from the WT. Such directors will have to report the payments they receive on their personal tax returns.
Payments Free From Withholding Tax
Dividends Payments
Even if the non-resident company or individual is located in the country which does not have any DTA with Singapore in force. This is one of the great advantages of the Singapore tax system, as dividends are not taxed on distribution, whether locally or to foreign jurisdictions.
Charter of Ships
Also excluded from withholding tax, as long as the foreign company does not have a permanent presence (establishment) in Singapore. This also includes payment for lease of containers with a minimum 20 foot capacity.
All payments made to Singapore branches of foreign companies.
For the full list of exclusions please visit the official IRAS webpage here: https://www.iras.gov.sg/taxes/withholding-tax/payments-to-non-resident-company/payments-that-are-not-subject-to-withholding-tax
Who Is Subject to Withholding Tax
According to Singapore tax law, both individuals and legal entities, “persons” who make payments of a certain nature as outlined to a non-resident company or individual are required to withhold a percentage of that payment and pay this amount to IRAS.
Filing and Paying Withholding Tax to IRAS
If the company has made a payment to a non-resident, it will have to file and pay WT on the 15th day of the second month from the date of payment. For example, if a payment was made on May 23rd, the WT would be due on July 15th.
If a company fails to file and pay WT by the due date, IRAS will issue a notice of enforcement and a 5% penalty will be imposed.
The date of payment is determined by the earliest date of the following documents: Date on the contract, date on the invoice or date of actual payment.
Exemption from Double Taxation Under the Double Treaty Agreement (DTA)
Singapore has an extensive network of double tax treaties (DTAs) that can reduce the tax burden for non-residents who receive income from sources in Singapore. A non-resident company or individual operating in a jurisdiction that has a tax treaty with Singapore will be charged at the rate specified in the DTA. Please note that the rate will also depend on the type of service provided and the provisions of the DTA.
The amount of WT payable can vary greatly depending on whether a non-resident payee is located in the country which is a part of an existent DTA network with Singapore. Singapore has entered into DTAs with more than 80 countries. If the non resident company is located in a non-DTA country, the withholding tax will be 15%.
