When do you have to comply with Singapore withholding tax?

1. What is Singapore withholding tax?

Singapore withholding tax is a tax collection mechanism applied to certain payments made to non-resident individuals or companies for Singapore-sourced or deemed Singapore-sourced income. In this system, a Singapore taxpayer withholds a percentage of a payment made to a non-resident and remits that amount to the Inland Revenue Authority of Singapore (IRAS).

Put simply, if a Singapore company pays certain types of income to non-residents, it must withhold tax at the appropriate Singapore withholding tax rate and submit the appropriate form and pay the tax withheld to IRAS. This helps ensure the government collects tax at the source of the income.

Example: If a company pays royalties to the Intellectual Property owner or service fees to a foreign contractor, it must withhold a percentage of the payment and pay it to IRAS under the Singapore withholding tax mechanism.

Singapore withholding tax applies when:

• Payments are made to non-resident companies or individuals.
• The income is Singapore-sourced.
• Payments include common ones like royalties, interest, technical service fees for services rendered in Singapore.
• Rent for moveable properties.

2. How is withholding tax levied in Singapore?

Unlike corporate or personal income tax – which is collected from the taxpayer – Singapore withholding tax is deducted directly by the taxpayer at the time of payment. While the tax burden lies with the non-resident, the Singapore company (payer) is responsible for withholding and paying the correct tax amount to IRAS.

3. How to determine tax residency for imposing Singapore withholding tax?

Non-resident Company –

According to the Singapore Income Tax 1947 and the tax regulations, the tax residency of a company is determined by the location where the company’s business is controlled and managed.

Control and management are the processes of making strategic decisions, such as policy formulation and strategy development. These are questions of fact. Generally, a non-resident company is

• a company incorporated in a foreign jurisdiction. A Singapore branch of a foreign company also comes under this definition of a non-resident; or
• a Singapore-incorporated company that does not meet the requirements to be a Singapore tax resident, e.g. if its control and management are exercised outside Singapore.

It should be noted that the company’s tax residency status may change from year to year.

Non-resident professionals –

• Non-resident professionals are self-employed personnel who work independently under “contract for service” terms.
• A foreign individual residing in Singapore for less than 183 days in the calendar year preceding the year of assessment.

4. What is are some of the Singapore withholding tax rates?

Subject to the Avoidance of Double Taxation Agreements, the common withholding tax rates are as follows (non-exhaustive):

Withholding Tax Rate in Singapore

5. How to file and pay the Singapore withholding tax?

Under the Singapore withholding tax mechanism, companies must file and pay the tax by the 15th of the second month following the date of the payment or deemed payment to the non-resident.

Example:

If a payment of $2,000 is made on 5 March 2025, the company must file and remit the Singapore withholding tax by 15 May 2025.

To determine the applicable payment date, except for director’s fee which has a different set of payment rules, companies must consider the earliest of:

• 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 taken into consideration).
• when payment is credited to the account of the non-resident or any other account(s) designated by the non-resident.
• the date of actual payment.

Penalties for late payment of the Singapore withholding tax

Failure to file and pay the Singapore withholding tax on time will result in penalties imposed by IRAS:

• Initial penalty: A 5% late payment penalty will be applied once the deadline is missed.
• Additional penalties: If the tax remains unpaid 30 days, an additional 1% penalty per completed month applies (capped at 15% in total).

These penalties can add up quickly and create an unnecessary financial burden, not to mention reputation damage, for your business.

Let Nexia Singapore help

Nexia Singapore PAC can assist your company with the Singapore withholding tax compliance, including filing, due date management and accurate application of the correct Singapore withholding tax rate — helping you avoid costly delays and penalties.

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