This article looks at the various types of payments subject to withholding tax in Singapore, as well as the applicable tax rates for non-resident individuals and companies. It also tackles the different tax refund schemes available in the city-state.
Read on to discover all you need to know about your tax responsibilities, to ensure compliance with Singapore tax regulations and avoid possible fines and penalties .
What is the withholding tax in Singapore?
The withholding tax is a scheme of collecting corporate tax from certain groups of non-residents. According to the Singapore Inland Revenue Authority (IRAS), withholding tax, also known as tax deduction at source at some other countries, is the amount of charged to a non-resident company or individual that receives a payment from any Singapore source. The payment can be royalties, interests or technical service fees. It is to be highlighted that from 1 July 2016, the withholding tax must be filed and paid online.
How is a company or individual considered as being non-resident?
In order to know whether withholding tax needs to be paid, the payer will have to ascertain whether the company or individual receiving the payment is non-resident. In terms of entity, a company is deemed non-resident when it is incorporated and managed outside Singapore. The control and management of a company refers to the decision-making pertaining to activities related to policy and strategy. A company’s residency status can change from one year to the next.
In terms of individual, a foreigner working in Singapore is considered a non-resident, if they have stayed in Singapore for less than 183 days. A foreign non-resident professional can be an expert invited to Singapore to share technical knowledge, a speaker or academic carrying out work sessions, a consultant, a trainer, a coach, a person working via a foreign firm, as well as a Queen’s Counsel. These individuals are typically employed as independent experts. At a more senior level, a company director is deemed a non-resident director in Singapore, if they have been physically present in Singapore for less than 183 days.
What are the withholding tax rates for Singapore non-resident companies?
Depending on the nature of income, the withholding tax rates also vary.
There is a 3% of withholding tax on commission and/or payment made to a non-resident international market agent.
A 10% of withholding tax rate is applicable to royalty; any lump sum payment for moveable properties such as cars, mobile phones or laptops; the right of use of scientific, technical, industrial or commercial information; and the distribution of taxable income made by REIT to a unit holder who is a non-resident entity.
A 15% of withholding tax in Singapore is levied on interest, commission, fee or other payment related to a loan or indebtedness; the proceeds from the sale of a real property by a non-resident property trader; and rent or payments made for the use of moveable properties.
What are the withholding tax rates for Singapore non-resident professionals?
Non-resident professionals are either subject to 15% of withholding tax on their gross income or 22% of withholding tax, if they have chosen to be taxed on their net income. The non-resident professionals should pay their withholding taxes by the 15th of the second month from the date of payment. As to non-resident directors, they are subject to a 22% of withholding tax on any payments they receive.
What are the withholding tax rates for the withdrawal from the Supplementary Retirement Scheme Account?
In the event that a non-Singaporean holder of a Supplementary Retirement Scheme (SRS) Account wishes to withdraw from his account, either a 50% or 100% of the withdrawn amount will be subject to a withholding tax. A non-Singaporean refers to either a foreigner or a Singapore Permanent Resident. This is typically a 22% of withholding tax rate. Separately, a 15% of withholding tax rate is applicable if the SRS account holder does not withdraw more than S$200,000 in that calendar year, and he does not have any other income for that calendar year.
What are the items that are not subject to withholding tax in Singapore?
At the non-resident company level, the following items are not subject to withholding tax:
- Dividend payments;
- Interest, commission;
- Royalties or management fee payments to the Singapore branches of non-resident companies on or after 21 February 2014;
- Payments to specified entities such as banks and finance companies;
- Charter fee payments.
The latter is excluding permanent establishments in Singapore. In addition, the payments for the use of satellite capacity or international submarine cable capacity are not taxable either.
At the non-resident professional level, the per diem allowance of an estimated S$140 per day, accommodation, travelling and entertainment payments for non-resident directors are not taxable.
Are there any tax refunds for non-resident companies?
A non-resident company can seek a tax refund on his expenses made while deriving income. In order to get the tax refund, the non-resident company will need to provide all the necessary information for tax computation.
The amount of tax refund to be obtained will be the excess of the tax on the net income. At a broader level, a non-resident company can also consider tapping on the Avoidance of Double Taxation Agreement (DTA) for double taxation relief if conditions are being satisfied.
Likewise, certain non-resident professionals can also claim exemptions from the DTAs such as non-resident arbitrators and non-resident mediators.
How to avoid double taxation?
In order to provide a friendly tax policy both for companies and individuals, Singapore has signed Double Taxation Treaties (DTAs) with over 60 countries. Hence, if a non-resident company is incorporated in a country which has a DTA with Singapore, it may benefit from a DTA relief, depending on the type of service it provides and the provisions of the particular treaty.