Withholding Tax (WHT)
Under Section 45 of the Income Tax Act, it is the responsibility of the payer (person who make the payment) to withhold tax when payment of a certain nature (i.e. royalty fees, interest, technical assistance, director’s fees etc.) was made to a non-resident company/ individual of Singapore. The payer needs to withhold a percentage of the payment and pay the tax withheld to IRAS which is known as Withholding Tax.
Examples of payments that attract WHT
- Royalty fees
- Interest
- Rent for use of movable properties (e.g. equipment)
- Technical assistance and service fees
- Management fees
- Director’s fees
Late Payment Penalty
Withholding tax is due on the 15th of the second month from the date of payment to the non-resident. A late payment penalty of 5% will be imposed if the payment is made to IRAS after the payment due date. An additional penalty of 1% per month will be imposed for every completed month if the payment remains unpaid 30 days after the payment due date, up to a maximum of 15%.
How we can help
We help companies with reviewing and structuring of contracts (i.e purchases, technical assistance etc.) to mitigate the WHT taxes. We can assist to perform health checks on companies’ contracts/ agreements to identify transactions which attract withholding tax, but tax wrongly deducted or not deducted, suggest remediation actions such as preparing the relevant withholding tax returns and backfiling them with IRAS. We can also help companies to apply through the Voluntary Disclosure Program for reduced penalties where applicable/possible.
For more information, please contact Michelle Tan or Elaine Chow.
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