Singapore Withholding Tax serves as a mechanism for the collection of taxes from non-resident individuals and companies who generate income from activities within Singapore.
As the term implies, Singapore-based businesses are mandated to retain a portion of specific payments made to non-residents and subsequently remit the withheld sum to the Inland Revenue Authority of Singapore (IRAS).
What is Withholding Tax in Singapore?
Singapore withholding tax, often referred to as tax deduction at source in some other countries, is a tax collected and remitted to the Inland Revenue Authority of Singapore (IRAS) when a non-resident individual or company earns income from a source within Singapore.
This income typically stems from services rendered or work conducted within Singapore. IRAS functions as the tax authority in Singapore.
When a Singapore-based company or individual disburses payment to a non-resident for services provided within Singapore, a portion of that payment is required to be withheld and subsequently transferred to IRAS.
This process is aptly termed “withholding tax.
Withholding Tax Rate in Singapore
The Singapore withholding tax rate is a pivotal component of the country’s tax system, governing the amount withheld from payments made to non-residents for services rendered within Singapore.
| Income Type | Withholding 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% |
| Proceeds from the 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% |
| Payment for services rendered in Singapore by a non-resident company | Withholding tax is determined by the corresponding corporate tax rate |
| Technical assistance and service fees | “ |
| Management fees | “ |
Read also- Personal Income Tax Singapore
Who Needs to Pay Withholding Tax?
Withholding tax is not a universal tax obligation in Singapore. In fact, it only comes into play when payments are being made to non-residents.
Furthermore, not all types of payments are subject to withholding tax, and this aspect can be explored further in our next discussion.
It’s crucial to understand that only services provided within Singapore are susceptible to withholding tax, and the tax obligation exclusively applies to income generated from Singaporean sources.
Who Is Liable to Pay Withholding Tax in Singapore?
Who bears the responsibility of paying withholding tax in Singapore? Let’s delve into the distinctive categories:
Non-Resident Companies:
- Companies registered abroad or in Singapore but not meeting tax residency criteria fall under this category.
- Payments to these companies are subject to withholding tax, even if they have a branch in Singapore managed by a parent company abroad.
Non-Resident Professionals:
- Foreign professionals in Singapore for less than 183 days in a year are considered non-residents.
- Their income, including wages and non-cash benefits, is subject to withholding tax.
Non-Resident Employees:
- Foreigners employed in Singapore with valid permits or visas for less than 183 days are non-resident employees.
- Payments to them are subject to withholding tax, except during the initial 60 days of employment.
- If their stay exceeds 183 days, they transition to Singapore tax residents and are taxed accordingly.
Singapore Withholding Tax Calculation
If a foreigner or Singapore Permanent Resident (SPR) has amassed $300,000 in their Supplementary Retirement Scheme (SRS) account by the age of 62 and opts to withdraw the entire sum, they will be subject to taxation on half of the withdrawn amount.
Here’s an example of Singapore Withholding Tax Calculation-
- SRS Withdrawn: $300,000
- Amount Subject to Tax: 50% x $300,000 = $150,000
- Withholding Tax at 24%: 24% x $150,000 = $36,000
- Actual Amount Received: $300,000 – $36,000 = $264,000
It’s essential to note that starting from July 1, 2014, a reduced withholding tax rate of 15% applies if the following conditions are met:
The cumulative amount withdrawn by the SRS account holder in the calendar year does not exceed $200,000.
The SRS account holder has no other sources of income apart from the SRS withdrawal(s) during the calendar year when the withdrawal(s) occur.
Claiming Refunds on Withholding Tax in Singapore
Claiming refunds on withholding tax in Singapore is a process designed to ensure that you receive the appropriate tax credit for amounts withheld, which can then be used to offset your actual tax liability.
Any excess tax credit that remains unused will be refunded to you.
To illustrate this, let’s consider an example.
Assuming that the actual tax rate applicable to your Supplementary Retirement Scheme (SRS) withdrawal is ultimately determined to be 15%, and you have no other tax liability, the refund calculation unfolds as follows:
- SRS Withdrawn: $300,000
- Amount Subject to Tax: 50% x $300,000 = $150,000
- Withholding Tax at 24%: 24% x $150,000 = $36,000
- Actual Tax Rate Applicable (15%): 15% x $150,000 = $22,500
- Amount To Be Refunded: $36,000 – $22,500 = $13,500
Ensuring accurate documentation is crucial to receiving the tax refund promptly and efficiently.
Withholding Tax Payments in Singapore
Wondering how to go about filing and paying withholding taxes in Singapore? Here’s a concise guide:
Filing Deadline: Companies are obligated to file and pay withholding tax by the 15th of the second month following the payment to a non-resident.
For instance, if a payment was made on August 23, the withholding tax payment would be due by October 15.
Filing Process: To file and pay withholding tax in Singapore, utilize Singapore Corporate Access (Corppass). Follow these steps:
- Fill out the necessary form on the IRAS website.
- Submit the completed form.
- Review the acknowledgment page for confirmation.
- Make the required payment.
Determining Payment Date: When determining the payment date for withholding tax, consider the earliest of the following:
- The date specified in the contract.
- If there’s no contract, the date is listed on the invoice.
- The date when the income was credited to the non-resident’s account.
- The date of actual payment.
Please note that credit terms should not be factored into the calculation of the payment date.
Penalties for Late Payment: If a company fails to file and pay withholding tax by the due date, IRAS will issue a Demand Note, accompanied by a 5% penalty.
Further, additional penalties will be imposed if the withholding tax remains unpaid for 30 days after the due date mentioned in the Demand Note.
What happens If Anybody Misses to Pay Withholding Tax in Singapore?
What happens if you miss the deadline to settle your Singapore withholding tax? In such a scenario, the Inland Revenue Authority of Singapore (IRAS) will take action by issuing a Demand Note.
- This notice will not only include the late payment penalty, which currently stands at 5%, but it will also set a due date for payment.
- Failure to meet this due date, including the late payment penalty, can lead to additional penalties.
- Specifically, you may incur an extra 1% penalty for each month the payment remains outstanding, up to a maximum cap of 15%.
- For further insights and practical penalty calculations, you can refer to IRAS’ comprehensive tax penalty guide.
To avoid these penalties and manage your Singapore withholding tax obligations effectively, consider exploring our specialized tax services.
FAQs About Singapore Withholding Tax
Here are some frequently asked questions (FAQs) related to Singapore Withholding Tax:
Who is required to pay Withholding Tax in Singapore?
Ans: Withholding Tax is typically the responsibility of the payer, which can be a Singapore-based company or individual when making payments to non-resident entities or professionals.
What types of payments are subject to Withholding Tax?
Ans: Payments for services rendered in Singapore, royalties, interest, and certain other types of income are typically subject to Withholding Tax when paid to non-resident recipients.
When is the Withholding Tax payment due in Singapore?
Ans: Withholding Tax payments are generally due on the 15th of the second month following the payment to the non-resident entity or individual.
What happens if I miss the deadline for Withholding Tax payment?
Ans: Missing the deadline can result in penalties, including a 5% late payment penalty. Further delays can lead to additional penalties of 1% per month (up to a maximum of 15%) on the outstanding amount.
Are there any exceptions to Withholding Tax in Singapore?
Ans: Yes, payments to Singapore tax residents are typically exempt from Withholding Tax. The tax is primarily applicable to non-resident recipients.
How can I file and pay Withholding Tax in Singapore?
Ans: Withholding Tax can be filed and paid using Singapore Corporate Access (Corppass) through the IRAS website. The process is straightforward and can be completed in minutes.
Is there a reduced tax rate for Withholding Tax in certain cases?
Ans: Yes, a reduced tax rate of 15% may apply if specific conditions are met, such as not exceeding a certain cumulative withdrawal limit and having no other sources of income in the calendar year.
Where can I find more information on Singapore Withholding Tax?
Ans: You can visit the Inland Revenue Authority of Singapore (IRAS) website for comprehensive information, guidelines, and resources related to Withholding Tax in Singapore.
Final Words
Understanding Singapore’s Withholding Tax is vital for both businesses and individuals engaged in financial transactions with non-residents in the country.
Navigating the Withholding Tax landscape involves adhering to deadlines, correctly calculating tax amounts, and, in some cases, benefiting from reduced tax rates based on specific conditions.
Failing to meet these obligations can lead to penalties, highlighting the importance of timely compliance.
