Types of Payments and Withholding Tax (WHT) Rates in Singapore

Withholding Tax (WHT) is a critical aspect of tax compliance for businesses making payments to non-residents in Singapore. The IRAS imposes WHT on specific types of payments to ensure tax is collected on income derived in Singapore by non-residents. This guide provides an overview of the types of payments subject to WHT, applicable rates, and key considerations for businesses.

What is Withholding Tax (WHT)?

WHT is a tax deducted at source by the payer on certain payments made to non-residents. The payer is responsible for filing and remitting the WHT to IRAS. This ensures compliance with Singapore’s tax laws and prevents tax evasion by non-residents earning income in Singapore.

Types of Payments Subject to WHT

1. Interest Payments
   • Definition: Payments for the use of money or credit.
   • Applicable WHT Rate: 15% (unless reduced by an applicable tax treaty).
2. Royalties
   • Definition: Payments for the use of or right to use intellectual property, trademarks, patents, or copyrights.
   • Applicable WHT Rate: 10% (unless reduced by an applicable tax treaty).
3. Technical Assistance and Service Fees
   • Definition: Payments for services rendered in Singapore, such as consultancy, engineering, or training.
   • Applicable WHT Rate: 17% (Corporate Tax Rate).
4. Management Fees
   • Definition: Payments for management services provided in Singapore.
   • Applicable WHT Rate: 17% (Corporate Tax Rate).
5. Rent or Payments for Movable Property
   • Definition: Payments for the lease or use of movable property, such as equipment.
   • Applicable WHT Rate: 15%.
6. Non-Resident Directors’ Fees
   • Definition: Fees paid to non-resident directors for services rendered in Singapore.
   • Applicable WHT Rate: 22%.
7. Non-Resident Entertainers’ Payments
   • Definition: Payments to non-resident entertainers performing in Singapore, such as artists, musicians, or athletes.
   • Applicable WHT Rate: 10%.
8. Non-Resident Professional Fees
   • Definition: Payments to non-resident professionals such as lawyers, consultants, or accountants.
   • Applicable WHT Rate: 15%.
9. Payments to Non-Resident Contractors
   • Definition: Payments for work or services performed in Singapore by non-resident contractors.
   • Applicable WHT Rate: 15%.

Key Considerations for Withholding Tax

1. Double Taxation Agreements (DTAs):
   • Singapore has DTAs with various countries, which may reduce WHT rates on certain payments. Verify if a reduced rate applies by checking the relevant DTA.
2. Filing and Payment Deadline:
   • WHT must be filed and paid by the 15th of the second month following the date of payment.
3. Gross Payments:
   • WHT is calculated on the gross amount of the payment made to the non-resident.
4. Record Keeping:
   • Maintain proper documentation, including contracts and payment details, to support WHT filings.

Examples of Withholding Tax Calculations

Scenario 1: Royalty Payment

• Payment to a non-resident for royalty use: $100,000.
• WHT Rate: 10%.
• WHT Amount: $100,000 x 10% = $10,000.

Scenario 2: Non-Resident Director Fee

• Director’s fee: $50,000.
• WHT Rate: 22%.
• WHT Amount: $50,000 x 22% = $11,000.

Common Mistakes to Avoid

1. Incorrect WHT Rates:
   • Verify the correct WHT rate, especially when a DTA applies.
2. Late Filing and Payment:
   • Missing the filing deadline can result in penalties and additional charges.
3. Misclassification of Payments:
   • Ensure accurate categorization of payments to determine the correct WHT rate.
4. Failure to Apply for DTA Benefits:
   • Not claiming reduced rates under applicable DTAs can lead to overpayment of WHT.

How Apexia Corporate Advisory Can Help

Navigating withholding tax regulations can be complex, especially when dealing with multiple payment types and tax treaties. At Apexia Corporate Advisory, we provide expert assistance to ensure your business remains compliant. Our services include:

1. WHT Advisory Services
   • Determine the correct WHT rates and applicability of DTAs.
2. Filing Assistance
   • Prepare and file withholding tax returns accurately and on time.
3. Compliance Reviews
   • Conduct reviews to ensure compliance with IRAS regulations.
4. Tax Treaty Application Support
   • Assist in applying reduced rates under DTAs.

Conclusion

Understanding the types of payments and applicable withholding tax rates is crucial for businesses in Singapore to comply with IRAS regulations and manage tax risks effectively. For professional advice and tailored solutions, contact Apexia Corporate Advisory today.