Companies, individuals, and other entities in Singapore must pay a withholding tax when making payments to non-resident entities.
The withholding tax only applies to non-resident companies or individuals who have sourced an income from Singapore. It is a common form of tax that most countries impose on cross-border transactions and other payments involving non-residents. It is called a withholding tax because it is levied on the payer rather than the recipient, meaning the taxable amount is withheld from the recipient.
Withholding tax rates
Payments that require withholding taxes in Singapore include payments for services, interest, royalties, rentals of movable properties, and direct payments to non-residents.
The types of income subjected to withholding tax are:
|
Withholding Tax on Payments to Non-Resident Companies |
|
|
Nature of Income |
Tax Rate (in %) |
|
Dividends |
Exempt |
|
Interest |
15 |
|
Royalties |
10 |
|
Technical assistance and service fees |
17 |
|
Rent on moveable property |
15 |
|
Charter fees for aircraft or ship |
0-2 |
Payers do not need to pay any withholding taxes to resident individuals and corporations. Singapore’s standard non-treaty withholding tax rates are zero for dividends, 15 percent for interest, and 10 percent for royalties.
Singapore has tax treaties with several countries, many of which lower withholding tax rates. For example, its agreement with Malaysia lowers the withholding tax rate on interest from 15 percent to 10 percent, and the rate for royalties from 10 percent to 8 percent.
|
Withholding Tax Rates in Singapore |
|
|
Nature of income |
Tax rate (%) |
|
Interest, commission, fee, or other payment in connection with any loan or indebtedness |
15 |
|
Royalty or other lump sum payments for the use of moveable properties |
10 |
|
Royalty and other payment made to author, composer, or choreographer |
22 |
|
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 |
Prevailing Corporate Tax rate |
|
Management fees |
Prevailing Corporate Tax rate |
|
Time, voyage, and bareboat charter fees for charter of aircrafts |
Applicable aircraft charter rates |
|
Time, voyage, and bareboat charter fees for the charter of ships |
Nil |
|
Proceeds from sale of any real property by a non-resident property trader |
15 |
|
Distribution of taxable income made by REIT to unitholder who is a non-resident (other than an individual) |
10 |
|
Payment to non-resident director |
22 |
|
Payment to non-resident professional/foreign firms (unincorporated) |
15 - on gross income or prevailing non-resident individual rate on net income |
|
Payment to non-resident public entertainer |
10 - on gross income |
|
Commission/payment to non-resident international market agent |
3 |
|
Source: Inland Revenue Authority of Singapore |
|
The withholding tax rate for royalties or other payments made to an author, composer, choreographer, or non-resident director is 24 percent.
Filing withholding taxes
Payers subject to a withholding tax must file and pay the tax to the IRAS by the 15th of the second month following when the payment was made. The payment timeframe is based on the earliest date of the contract, invoice, payment, or when the recipient was credited.
Payers that miss the filing and payment deadline will be subject to an additional five percent penalty in the form of a late payment penalty notice. Further penalties apply if the payer still has not paid within 30 days of the notice’s issuance.
Resident vs. Non-resident Companies
Companies, individuals, and other Singapore-based entities must pay withholding tax when making a payment to a non-resident.
In Singapore, a company is either a resident or a non-resident. The Inland Revenue Authority of Singapore (IRAS) determines residency by where the company is controlled and managed, or in other words, where it makes decisions on strategic matters. This means that a company’s residency is not necessarily the location of where it is incorporated.
For example, a company might be incorporated in Singapore, but be considered a non-resident if decisions are de facto made in another jurisdiction, such as Hong Kong or London. One factor in determining residency – but not necessarily the only one – is where the company holds its Board of Directors meeting.
Non-resident Individuals
The IRAS classifies non-resident individuals into three different categories:
- Foreign professionals;
- Public entertainers, and
- Board directors.
Residency for all three categories depends on whether they spend less than 183 days in a calendar year in Singapore, but they have different obligations for tax purposes.
A professional is a non-resident if they are in Singapore for less than 183 days in a calendar year. Examples of foreign professionals include foreign experts or consultants invited to Singapore to share knowledge or expertise with an organization, an academic attending a seminar or workshop, or an individual operating via a foreign company.
Foreign public entertainers are those who visit Singapore to perform and spend less than 183 days in the country, are classified as public entertainers regardless of whether they are working as individuals or as employees. The IRAS does not include individuals who assist public entertainers with their performances in this category, such as audio crewmembers, choreographers, coaches, and personal trainers.
Board directors, or company directors, are non-residents if they spend less than 183 in a calendar year in Singapore. A board director may also hold another role within a company, such as a chief executive officer or managing director, but they are only considered a board director for income derived in that role.
