Singapore Withholding Tax Explained
Withholding taxes are taxes that are deducted from the source. The source would usually be other countries. Withholding taxes are withheld (hence the name). The sum is then paid to Singapore’s tax authority, IRAS (Inland Revenue Authority of Singapore).
Individuals and non-resident companies that derive an income from a Singapore source will be subject to withholding taxes. Taxes are incurred on any services or work that is done within Singapore. When either the non-resident company or individual pays for any service that is performed within Singapore, some of the payment must be withheld for IRAS.
When Does Withholding Tax Apply?
Only individuals and non-resident companies will be subject to Singapore withholding tax. This form of tax is applicable if the income is generated from a source in Singapore. Tax is applicable if services within Singapore have been paid for.
Per the Singapore tax laws, specific types of payments will also be subject to withholding taxes. This includes the following:
- Allowances or wages
- Any other expenses that are incurred in addition to the original expense
- Commissions and interests
- Loan or debt-related fees (taxes are changed on interests)
- Intellectual property
- Royalty (10% or taxed at the prevailing corporate rate)
- Rights to use
- Management fees (Taxed at the prevailing corporate rate)
- Services rendered (Taxed at the prevailing corporate rate)
What is Considered a Non-resident Company?
In Singapore, a non-resident company needs to fit a few criteria for tax purposes. This includes the fact that the company is incorporated outside of Singapore but has a base of operations within Singapore. Any branches of foreign companies based in Singapore are also considered non-resident.
Any offices that are incorporated in Singapore are also subject to withholding taxes. This applies if these offices are managed from outside Singapore.
How Are Non-Resident Individuals Taxed?
Non-resident individuals are considered taxable if they spent less than 183 in Singapore per year. This includes specialists, experts, and foreign professionals. It also includes any private organisations, government bodies, or statutory boards that provide technical expertise within Singapore.
Also included in the list of taxable non-resident individuals include academics or foreign speakers at workshops and seminars. Public entertainers, coaches, consultants, and trainers are non-resident individuals that are liable for withholding taxes. Queen’s Counsels are also non-resident taxable individuals.
During the course of this time, they must have provided services to the country. Withholding taxes apply on any income these individuals earn in Singapore. If the income earned in Singapore is considered withholding tax-free, all payments will then be net payments. However, the Singapore payer still needs to pay withholding taxes. It is up to them to work out how much must be paid to the IRS.
Pay Your Taxes on Time
It is very important that you pay your taxes on time. Any late payments will receive a Demand Note from the IRAS. You will also be charged a late penalty fee of 5%.
Need help with your taxes? Kindly contact 3E Accounting for Taxation Services in Singapore.