Under Singapore law, a person (known as the Payer) who makes payment(s) of a specified nature (e.g. Royalty, Interest, Technical Service Fee, etc.) to a non-resident company or individual (known as Payee) is required to withhold a percentage of that payment and pay the amount withheld(called ‘Withholding Tax’) to IRAS.
Nature of payment that attracts withholding tax:-
- Payments for Services, Interest, Royalty, Rental of Movable Properties, etc.
- Payments to Non-Resident Directors, Professionals, Public Entertainers & International Market Agents
- Foreigners/PRs Withdrawing from Supplementary Retirement Scheme (SRS) Account
- Distribution of Real Estate Investment Trust (REITs)
To determine whether withholding tax is applicable, the Payer has to ascertain that the payment was made to a company or an individual who is Non-Resident in Singapore.
A company is either a tax resident or a non-resident of Singapore. In Singapore, the tax residency of a company is determined by the place in which the business is controlled and managed.
“Control and management” is the making of decisions on strategic matters, such as those on company policy and strategy. Where the control and management of a company is exercised is a question of fact. Typically, the location of the company’s Board of Directors meetings, during which strategic decisions are made, is a key factor in determining where the control and management is exercised.
Conversely, a company is a non-resident when the control and management of the company is not exercised in Singapore.
Do note that the place of incorporation of a company is not necessarily indicative of the tax residence of a company.
Foreign Professional (Non Resident Professional)
Foreign professionals are individuals exercising any profession or vocation (i.e. persons other than employees) of an independent nature under a contract for service and includes:
- a foreign expert who is either invited by government bodies, statutory boards, or private organisations to impart their technical know-how or expertise in Singapore;
- a foreign speaker/academic conducting seminars or workshops;
- Queen’s Counsels;
- Consultants, trainers, coaches; and
- an individual who operates through a foreign firm
The professional is treated as a non-resident if he is in Singapore for less than 183 days in a calendar year.
Foreign Firm – A foreign firm is defined as an unincorporated body of two or more persons who have entered into a partnership with a view to carry on business for profit and whose principal place of business is outside Singapore.Foreign firm does not include foreign universities, foreign clubs and associations, foreign government and foreign government bodies.
Non-Resident Public Entertainer
A public entertainer performing in Singapore can be exercising a profession, vocation or employment. Public entertainers include:
- Stage, radio or television artistes (e.g. singers, dancers, actors) and musicians; and
- Athletes (all sportsmen in any sporting events or tournaments e.g. golfers, tennis players, horse jockeys, racing drivers, runners).
A public entertainer performing in Singapore can be exercising a profession, vocation or employment.
Non-Public Entertainers – Those who work behind the scenes such as crew, choreographers, directors in the entertainment scene or horse trainers, coaches, personal trainers for sporting events will not be treated as public entertainers.
The public entertainer is treated as non-resident if he is in Singapore for less than 183 days in calendar year.
Foreign Board Director (Non-Resident Director)
For tax purposes, a board director is a member of the board of directors of a company.
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