Withholding Tax Filing and Consultation
Withholding tax in Singapore and how does it arise?
Withholding tax is levied on income earned by non-residents from sources within Singapore. It is deducted at source by the payer (the withholding agent) before making payments to the non-resident. The tax is then remitted to the Inland Revenue Authority of Singapore (IRAS) on behalf of the non-resident recipient.
In simple terms, the Singapore entity remitting income back to a foreign entity needs to withhold a portion of that income prior to remittance. So, the Singapore company acts as a tax collection agent for the IRAS.
Each type of payment has its own prescribed withholding tax rates, definitions, and conditions. These may vary depending on the nature of the payment and any applicable tax treaties between Singapore and the recipient's country of residence.
What payments are subject to withholding tax?
Withholding tax applies to a range of payments, including interest, royalties, rental income, technical service fees, management fees, and director's fees.
Interest:
Payments made to non-resident lenders for interest on loans.
Royalties:
Payments made for the use of intellectual property such as patents, trademarks, copyrights, etc.
Technical Service Fees:
Payments made for technical or consultancy services provided by non-residents.
Management Fees:
Certain management or administration fees are paid to non-resident entities.
Rent:
Payments for the use of real property located in Singapore.
Director's Fees:
Fees paid to non-resident directors for their services rendered to Singapore-based companies.
The deadline for filing withholding tax requires ascertaining certain facts. Generally, it must be submitted before the 15th of the second month in which the date of payment occurs to the non-reside, where the date of payment is established to be the earliest of 3 criteria: (Read more here)
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When the payment is due and payable based on the agreement or contract or the date of the invoice in the absence of any agreement or contract (credit terms should not be considered).
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When payment is credited to the account of the non-resident or any other account(s) designated by the non-resident
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The date of actual payment
Deadline of withholding tax
Computation
The accuracy of the computation of withholding tax is significant. Assuming erroneous filing, IRAS may take steps to recover the sum from the resident. You may find yourself in a challenging and awkward position to recover this sum from the non-resident.
Supporting document
Supporting documents are critical to prove your claim of what constitutes the “payment date.” With foreign currency involved, consistency in your exchange rate sources is also crucial. These supporting documents will be critical in the event of a withholding tax check or audit.
Deadline establishment
Compliance with the deadline for withholding tax is always challenging. Since this deadline is based on each transaction, standard procedures should be in place to segregate withholding tax payments promptly. This will assist greatly in ensuring consistent compliance. (This is essential if the non-resident is an unrelated party and recoverability will be an added challenge/potential liability)
Filing
As a tax service provider, we are committed to remaining compliant, accurate, and timely in filing withholding tax. As an added level of assurance, our tax experts will seek your approval prior to the filing, adding accountability without sacrificing convenience.
How can we help?
Of course, we are here to help you with everything relating to withholding tax. This includes the computation, supporting documents, deadline establishment, and filing of the withholding tax.
Withholding tax is not a standalone tax, but it is often overlooked, missed, or complications may occur due to cross-border contract complexity. An entity with foreign transactions that attract withholding tax should be extra mindful to remain compliant.
Pricing will be quoted upon request. It will depend on the number of expected transactions (that attract withholding tax), the variety (one or many different types), and the complexity of each withholding tax payment.
Pricing
