This is a comprehensive guide on withholding tax in Singapore.
Where a Singapore person makes payment(s) of a specified nature to a non-resident company or individual, the payer is required to withhold a percentage of that payment and pay the amount withheld to the IRAS, this is how withholding tax in Singapore is collected. The amount withheld depends on the nature of the payment and whether the recipient is eligible for the benefits of a double tax treaty with Singapore that will reduce the rate.
Interest, commission or fees in respect of any indebtedness
The rate of withholding tax (WHT) is 15% on interest paid offshore on any indebtedness.
Some interest rate swaps or currency swaps may be subject to WHT if the instruments are designed in such a way that there is a financing element involved in the swap or there is a very close nexus between the swap and an underlying financing transaction.
There are also reductions in the basic rate of interest withholding tax in Singapore’s double tax treaties, generally to somewhere between 5% and 10%.
There are some exemptions to the general interest WHT rule:
- Interest paid by banks, finance companies or other approved institutions (for example, an Approved Finance and Treasury Centre (FTC)). This exemption is currently in place until 31 March 2021. The exemption is designed to encourage a vibrant and international banking sector in Singapore.
- Interest paid to a Singapore branch of a non-resident company – the Singapore branch will still be liable for Singapore tax on the interest received. This exemption is designed to cut down on the compliance burden of the Singapore company paying the interest
- Interest paid to a non-resident for a loan obtained from outside Singapore for acquiring immovable property outside of Singapore
The general rate of WHT on royalties is 10%, but many treaties reduce that rate to between 5% and 8%.
Within the broad royalty category comes payments for the use of or the right to use scientific, technical, industrial or commercial knowledge or information or for the rendering of assistance or service in connection with the application or use of such knowledge or information, for example, the right to use information provided by Bloomberg or Reuters.
Where management services are performed in Singapore by a non-resident, the fees payable will be subject to WHT at the prevailing corporate tax rate, which is currently 17%. This withholding is not necessarily a final tax. If the company performing the services has incurred expenses in performing the services, it may lodge a tax return, claiming a deduction for those expenses and obtain a partial refund of the WHT deducted from the management fee payment.
Payments to non-resident directors
Director fees paid to non-resident directors of Singapore companies are subject to WHT at the highest individual tax rate, currently 22%.
Payments for the purchase of real property from a non-resident property trader
A buyer of a real property or his solicitor is required to withhold tax on the purchase price of that real property upon completion of the sale if the seller is a non-resident property trader at the rate of 17%.
Rent or other payments made to a non-resident for the use of moveable properties is subject to WHT at a rate of 15%.
Distribution from a REIT (real estate investment trust)
REIT distributions to unit-holders which are non-residents or non-individuals are subject to a final withholding tax of 10% up until 31 December 2025. In the absence of any change by the Singapore Government, the rate will then revert to the prevailing corporate tax rate.
Double tax treaties
Reductions of the basic rate of withholding tax is available if Singapore has signed a double tax treaty with the country to which the payment is being made. To lower the rate of withholding tax, the payer needs to obtain from the recipient of the payment a Certificate of Residence for that company or individual from the tax authority in their jurisdiction.
For example, various Singapore treaties reduce the withholding tax rate on interest to 5% or 10% and royalties to 5%. The COR must be lodged with the IRAS within three months of the end of the year which payment was made. Further details of the impact of Singapore’s double tax treaties can be found here [link to Singapore’s Double Tax Treaties]
Payment of withholding tax
A Singapore taxpayer that has deducted WHT from a payment made to a non-resident is required to electronically file a WHT return with the IRAS and pay the withholding tax by the 15th day of the second month following the payment to the non-resident. For example, if a payment is made to a non-resident in March, the e-filing and payment must be made by 15th May.
As a concession to simplify filing, if multiple payments have been made to the same non-resident professional or non-resident public entertainer in respect of the same engagement within a 60-days period, the payments can be consolidated into one e-filing with the last payment date being the date of payment to the non-resident.
If the payment is late, there will be a 5% penalty imposed.
Payments of withholding tax in Singapore must follow the obligations and requirements of the IRAS, and must be paid on time as the person will face penalties if the tax is not paid or is paid late. We recommend engaging with our services; our skilled tax team will help you stay compliant and notify you of any approaching deadlines.
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