Singapore Withholding Tax Guide

In Singapore, companies are required to withhold a percentage of certain payments made to non-residents and pay the withheld amount to the Inland Revenue Authority of Singapore (IRAS). Such amount withheld amount is called withholding tax. Find out more about how the country levies withholding tax through this article. 

The purpose of withholding tax

There are two main reasons for the withholding tax to be imposed. First, withholding tax prevents individuals from being blinded by substantial tax bills. In addition, when remitting a small portion of each paycheck, regulatory agencies ensure a stable cash flow throughout the year and thus reduce the risk that taxpayers will not pay their taxes.

A person’s tax liability may still be more or less than what they paid in withholding taxes in a year. If that happens, they may have to pay more money after the first quarter of the year, but they will receive a refund.

How withholding tax works in Singapore

Unlike traditional income taxes, where taxes are collected from the payee, withholding tax is deducted directly from the payer. In general, the withholding tax liability rests with non-residents. However, the payer is required to withhold the correct amount and pay the withholding tax to the IRAS.

Singapore withholding tax only applies to non-resident companies or individuals for:

• Income earned from Singapore sources;
• Services provided or work performed in Singapore;
• Specific types of payments;

Note that withholding tax is not levied on payments to Singapore tax residents. The underlying assumption is that such recipients regularly deal with IRAS and pay their taxes, whereas non-resident recipients may not pay the tax. Hence the tax must be withheld by the payer.

You may also want to read these related articles:

Singapore’s Double Tax Treaties Explained

An Introduction to Singapore Corporate Tax Filing

What are Tax Exemptions for Singapore Companies Like?

How tax residency is determined

Non-resident companies

In general, non-resident companies fall into one of the following categories:

• Companies incorporated in foreign jurisdictions (foreign companies with Singapore branches are also included in this definition); or
• Singapore incorporated companies that do not meet the requirements to become taxpayers.

A company is considered a taxpayer if the “control and management” is carried out in Singapore. According to IRAS, control and management refer to “making decisions about strategic matters, such as company policies and strategies.”

In addition, the location of company personnel who have a vital role in the company’s decision-making can also determine tax residency. For example, a Singapore branch of a foreign company is considered a non-resident because the branch is managed by a parent company in a jurisdiction outside of Singapore.

Non-resident professionals

A non-resident professional (NRP) refers to someone who has spent less than 183 days a year in Singapore while providing services in that country. Non-resident professionals are subject to Singapore withholding tax for all types of income they earn for services rendered in Singapore.

According to IRAS, NRPs include any of the following:

• Foreign professionals, experts, and specialists invited by government bodies, statutory boards, or private organizations to provide technical expertise in Singapore
• Foreign speakers or academics conducting seminars or workshops in Singapore
• Queen’s Counsels
• Consultants, trainers, and coaches
• Public entertainers

Withholding tax rates for payment to NRPs

In general, NRP’s income is subject to withholding tax at the following rates:

• 15% of the gross income/fees payable to the non-resident professional; or
• The non-resident rate of 22%  if the NRP has elected to be taxed on net income.

Non-resident employees

Foreign individuals who have worked for an employer in Singapore for less than 183 days are considered non-resident employees. Under Singapore’s tax laws, all monies due to non-resident employees are subject to withholding tax.

However, note that non-resident employees who work in Singapore for 60 days or less are exempt from withholding taxes. Furthermore, employees who work in Singapore for more than 183 days will be taxed as Singapore taxpayers at the appropriate personal income tax rate.

Depending on the employee’s income level, the withholding tax rate for employment income ranges between 15% and 22%.

Withholding tax rates for payments made to non-resident companies

The following table shows a clear picture of withholding tax rates for payments made to non-resident companies.

Payments that are not subject to withholding tax

According to IRAS, the following types of payments do not collect withholding taxes when paid to non-residents:

• Dividend payments;
• Payments to Singapore branches of non-resident companies;
• Payments made by banks, finance companies, and certain approved entities;
• Payments for the charter of ships; and
• Other payments such as payments for satellite capacity and the use of international submarine cable capacity.

The due date for filing and payment to IRAS

Companies must file and pay withholding taxes on the 15th day of the second month from the date the payments are made to non-residents. If you use GIRO for withholding tax payments, the date of withholding GIRO is on the 25th of the month the tax is due. However, if the date of the deduction for GIRO falls on a weekend or a national holiday, the deduction will be made on the next working day.

Penalty for late payment

A penalty will be imposed if the withholding tax is paid to IRAS after the payment due date or if the GIRO deduction is unsuccessful. If your company misses the deadline and pays the tax after the stipulated date, IRAS will send you a Demand Note and include the late payment penalty (currently 5%). Furthermore, failing to pay the tax and penalty by the due date stipulated in the Demand Note will cost you an additional penalty of 1% for each outstanding month (subject to a maximum of 15%).

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