Every entity is required to withhold tax before paying or crediting certain categories of income to any non-resident recipient. The rates of withholding tax for the most common elements are:
For illustration purposes, let’s assume that interest expenses amounting to $100,000 are due and payable by a Singapore incorporated company to a US incorporated company. On the date of the due payment, the Singapore company has to withhold and remit to the IRAS the amount of $15,000 together with a prescribed form. The balance of $85,000 can be remitted to the US incorporated company.
The above withholding tax rates may be mitigated where Singapore has a double tax treaty with the country of the recipient.
To reduce compliance costs for businesses, payers no longer need to withhold tax on sections 12 (6) and 12 (7) payments (e.g. interest and royalty payments) made to Singapore branches of non-resident companies. This change took effect for all payment obligations that arose on or after 21 February 2014.