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Withholding Tax in Singapore Guide

Whether you are a business owner, investor, or simply interested in understanding the intricacies of Singapore's tax system, this article aims to make the concept of withholding tax easy to grasp.

With Singapore being a global financial hub, it is crucial to stay informed about the latest regulations and guidelines surrounding this topic.

From an overview of withholding tax to its implications for different types of payments, this guide will provide you with the knowledge and tools to navigate the withholding tax landscape with confidence.

What Is Withholding Tax Singapore?

So, what exactly is withholding tax? Withholding tax in Singapore is used to collect taxes from non-resident companies and persons who earn an income from Singapore. This usually means that the withholding tax will be withheld by the payer and subsequently paid to the Inland Revenue Authority of Singapore (IRAS) as taxes.

Did You Know That Not Everyone Needs to Pay Withholding Tax?

  • Withholding tax is only payable when there are payments made to non-residents.
  • Not all payments are liable for withholding tax. We can talk more about this next.
  • Only services rendered in Singapore are liable for withholding tax.
  • Only Singapore-sourced income is liable for withholding tax.

Examples of Payments That Are Subjected to Withholding Tax

Let's get started on the types of payments subject to Singapore’s withholding tax:

Types of Payment Subject to Withholding Tax? Example
Fees, commissions, and interest payments related to loan or indebtedness yes Company “X” which is a resident company that pays interest to a foreign lender.
Use of or the right to use any moveable property payments, such as royalties and rents. yes Company “X” which is a resident company, paying for intellectual property provided by a non-resident. 
Payments of knowledge or information to technical, industrial, commercial, and scientific knowledge yes Company “X” which is a resident company, paying fees to a foreign consultant.
Management fees payments yes Company “X” which is a resident company, paying management fees to a non-resident company.
Payments for the purchase of real estate property from a non-resident property trader yes A Singaporean buying a property in Singapore that is owned by a non-resident trader. 
Structured product payments, except for payments that are eligible under the tax exemption scheme that falls under Section 13 (1)(zj) of the Income Tax Act 1947 yes Payments to a non-resident financial institution.
Real Estate Investment Trust (REIT) distributions yes Distributing returns to a non-resident unit holder.

How Is Singapore’s Withholding Tax Different From the Traditional Income Tax?

Most of us are quite familiar with how the income tax work. However, compared to the traditional income tax where tax are usually collected from the income recipient, withholding tax is collected from the source of the income. Despite tax liability falling on the non-resident, the payer will need to pay the withholding tax to IRAS by withholding a portion from the payment amount.

Depending on the type of payment, the withholding tax rate will differ. It is the percentage of the gross payment made to the non-resident.

An important note, the withholding tax is only liable to non-residents. For residents, all income will be liable for the income tax instead.

Who Is Liable to Pay Withholding Tax in Singapore?

Non-Resident Companies

Is your company registered abroad or registered in Singapore but fails to fulfill the criteria for tax residency? If so, your company is considered to be a non-resident company.

If your company has a Singapore branch despite it being a foreign company, it is still considered a non-resident because the branch is managed by the parent company in a jurisdiction outside of Singapore. Thus, payments made to these companies will be subject to withholding tax.

Non-Resident Professionals

Are you a foreign professional staying in Singapore for less than 183 days in a calendar year? If so you are considered a non-resident professional. The income earned by a non-resident professional is subject to withholding tax. These include wages, and non-cash payments such as accommodations, transport, allowances, and meals provided.

Non-resident professionals include:

  • Foreign experts, professionals, or specialists who are invited to work in Singapore
  • Foreign speakers or academics running a seminar or conducting workshops in Singapore
  • Foreign Lawyers who are hired to work on cases in Singapore
  • Consultants, coaches, and trainers
  • Professionals who operate through a foreign firm
  • Foreign entertainers such as musicians, athletes, artists, and actors/actresses
  • Foreign company directors

Non-Resident Employees

Are you a foreigner on a valid work permit or visa employed in Singapore for fewer than 183 days? If so, you are considered a non-resident employee. Under the Singapore tax law, all monies paid to a non-resident employee are subject to withholding tax.

Do note that for the first 60 days, non-resident employees are exempted from paying withholding tax. For non-resident employees who have been working in Singapore for more than 183 days will be taxed as a Singapore tax resident.

Withholding Tax Rates in Singapore

Type of Income Withholding Tax Rate
Payment for services rendered in Singapore by a
non-resident company; and

Management fees payments
The withholding tax rate is determined by the corresponding corporate tax rate
Payment of loan or indebtedness interest, commissions, fees, or other payments 15%
Payments for the purchase of real estate property from a non-resident property trader 15%
Use of or the right to use any moveable property payments, such as royalties and rents. 10%
Payments of knowledge or information to technical, industrial, commercial, and scientific knowledge 10%
Real Estate Investment Trust (REIT) distributions 10%

Withholding Tax Rates for Payments to Non-resident Professionals

Non-resident professionals are subject to withholding tax of 15% of the gross income or fees, or 22% if the non-resident professional has chosen to be taxed on net income.

Do note that there are two exceptions. Non-resident director's fees are charged at 22% withholding tax and non-resident entertainers are subjected to 10% withholding tax.

Are There Any Withholding Tax Relief Schemes?

It is not considered a tax relief scheme, but Singapore has signed Avoidance of Double Taxation Agreements, as such, if you have already paid for taxes, you will not need to pay again in Singapore. However, you will need to check that if you are operating in a jurisdiction that has a tax treaty with Singapore.

How Do I File and Pay Withholding Taxes in Singapore?

You can file and pay for withholding tax in Singapore by using Singapore Corporate Access (Corppass). Fill and submit the form on IRAS, view the acknowledgement page and make payment. This process is really simple and should be completed in 10-15 minutes.

Do note that companies are required to file and pay withholding tax on the 15th of the second month from the date the payment is made to a non-resident. For example, if you have made a payment on 29 March 2023, you will need to file and pay the withholding tax by 15 May 2023.

For companies who fail to file and pay the withholding tax by the due date, there will be a 5% penalty.

Final Thoughts

We hope that this guide has been helpful and we hope that your understanding of the withholding tax system in Singapore has improved.

In conclusion, understanding the withholding tax system in Singapore is important for companies looking to engage non-resident companies and individuals. Payments made to non-residents are taxed at different rates, and always remember that Singapore has signed the Avoidance of Double Taxation Agreement with many countries to avoid double taxation.

A woman holding an ACRA Incorporation form for Singaporean companies.

FAQs

Who is liable pay withholding tax in Singapore?

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Non-resident companies, non-resident professionals, and non-resident employees are subject to withholding tax.

Are there any withholding tax relief schemes?

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What is the withholding tax rate in Singapore?

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