Withholding tax in Singapore is used to collect taxes from non-residents companies and individuals who earn “Singapore-sourced” income. As the name suggests, Singapore companies are required to withhold a percentage of certain payments made to non-residents and pay the withheld amount to the Inland Revenue Authority of Singapore (IRAS). This guide provides an overview of this withholding tax in Singapore and it includes the following topics:
- How Singapore levies withholding tax
- How Singapore determines tax residency
- Types of payments subject to withholding tax and withholding tax rates
- Filing paperwork to pay the withholding taxes to IRAS
Key facts about withholding tax in Singapore
- Withholding tax only applies to payments made to non-resident companies and individuals.
- Only certain payments are charged the withholding tax.
- Withholding tax only applies to Singapore-sourced income.
- Withholding tax only applies to services rendered in Singapore.
How Singapore levies withholding tax
Compared to traditional income tax where the tax is collected from the payment recipient, withholding tax is deducted directly from the source i.e. the payer. In general, the withholding tax liability is on the non-resident. However, the payer (e.g. a Singapore company) is required to withhold the correct amount and pay the withholding tax to IRAS.
The tax withheld is a percentage of the gross payment made to the non-resident. The percentage varies depending on the type of payment.
As an important reminder, withholding tax is not levied on payments to Singapore tax residents. The underlying assumption is that such recipients deal with IRAS on a regular basis and will therefore pay their taxes whereas non-resident recipients may not pay the tax, hence the tax must be withheld by the payer.
In general, non-resident companies fall into one of the following categories:
- A company incorporated in a foreign jurisdiction (a Singapore branch of a foreign company also comes under this definition) or
- A company incorporated in Singapore that does not meet the requirements to be a tax resident.
A company is considered a tax resident if the “control and management” of the company take place in Singapore. According to IRAS, control and management refers to, “making decisions on strategic matters, such as those on company policy and strategy”.
In general, the location of company board meetings is a key factor in determining where a company is controlled and managed. Similarly, the location of company personnel who have a key role in the company’s decision making can also determine tax residency.
For example, a Singapore branch of a foreign company is considered a non-resident because the branch is managed by a parent company in a jurisdiction outside of Singapore.
The tax residency rules also apply to companies incorporated in Singapore. For example, a Singapore company that is managed from Hong Kong will be considered a non-resident for tax purposes.
Note that the tax residency status of a company can change from year to year.
A non-resident professional (NRP) is a foreign individual who has spent fewer than 183 days in Singapore offering his or her services. NRPs are not employees of any company but work independently and provide services under contractual terms.
All income paid to a NRP is subject to withholding tax including all wages and non-cash payments such as accommodations, airfare, transport, per diem allowances, and meals provided. According to IRAS, NRPs include any of the following:
- Foreign experts, specialists or professionals who are invited to work with the government, a statutory board, or a private organisation in Singapore
- Foreign speakers or academics conducting seminars or workshops in Singapore
- Queen’s Counsels — highly distinguished lawyers in the UK who are generally hired to argue complex cases.
- Consultants, trainers and coaches
- Individuals who operates through a foreign firm
- Foreign entertainers (e.g. artists, athletes, musicians, etc.)
- Foreign company directors
A non-resident employee is a foreign individual who has worked for an employer in Singapore for fewer than 183 days. Under Singapore tax law, all monies due to a non-resident employee are subject to withholding tax.
Note, non-resident employees who work in Singapore for 60 days or fewer are exempt from paying withholding tax. Furthermore, employees who work in Singapore for more than 183 days will be taxed as a Singapore tax resident at the corresponding personal income tax rate.
Depending on the employee’s income level, the withholding tax rate for employment income ranges between 15%-22%.
Withholding tax rates for payments made to non-resident companies
According to IRAS, the following payments made to non-resident companies are subject to withholding tax:
- Payment for services rendered in Singapore by a non-resident company
- Payments for the use of or the right to use scientific, technical, industrial or commercial knowledge
- Interest, commissions, or fees in connection with any loan or indebtedness: This includes interest on overdue trade accounts and interest on credit terms paid to a non-resident supplier.
- Royalty or other payments for the use of or the right to use any movable property
- Payments of management fees: This is in reference to payments made to overseas companies that provide services to manage a business.
- Rent or other payments for the use of any movable property
- Payments for the purchase of real property from a non-resident property trader
- Payouts on certain structured financial products
- Distributions of a real estate investment trust (REIT)
- Charter fees for ships and aircraft
|Income Type||Withholding Tax rate|
|Payment for services rendered in Singapore by a non-resident company||Withholding tax is determined by the corresponding corporate tax rate|
|Interest, commissions, fees or other payments in connection with any loan or indebtedness||15%|
|Royalty or other lump sum payments for the use of moveable properties||10%|
|Payment for the use of or the right to use scientific, technical, industrial or commercial knowledge or information||10%|
|Rent or other payments for the use of moveable properties||15%|
|Technical assistance and service fees||Withholding tax is determined by the corresponding corporate tax rate|
|Management fees||Withholding tax is determined by the corresponding corporate tax rate|
|Proceeds from sale of any real property by a non-resident property trader||15%|
|Distributions made by a REIT||10%|
|Charter fees (ships and aircraft)||0%-2%|
Withholding tax rates for payment to NRPs
In general, a non-resident professional’s income is subject to withholding tax at the following rates:
- 15% of the gross income or fees or
- 22% if the NRP has elected to be taxed on net income
Note, there are two main exceptions:
- Non-resident director’s fees are charged 22% withholding tax.
- Non-resident entertainers are subjected to a withholding tax of 10%.
Double taxation treaty relief
Singapore has a large network of Avoidance of Double Taxation Agreements (DTAs) that can lower the tax burden for non-residents who earn Singapore-sourced income. A non-resident company or individual that operates in a jurisdiction that has a tax treaty with Singapore will pay the rate specified in the DTA. Note that the type of relief will depend on the services provided and the provisions of the DTA.
Filing and paying withholding taxes with IRAS
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. For example if the payment was made on August 23, the withholding tax payment would be due October 15.
The exact date of payment should be determined by using the earliest of the following:
- The date on the contract
- 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
- The date of actual payment
Note, when determining the date of payment, companies should not take into consideration credit terms.
If a company fails to file and pay withholding tax by the due date, IRAS will issue a Demand Note and a 5% penalty will be assessed.
If the withholding tax is not paid within 30 days from the due date on the Demand Note, an additional penalty of 1% will be added for each month that the tax remains outstanding up to a maximum of 15%.