Nature of Payments That Are Subject to Withholding Tax

The following types of payments attract withholding tax when paid to non-resident companies:

  1. Interest, commission, fee in connection with any loan or indebtedness
  2. Royalty or other payments for the use of or the right to use any movable property; 
  3. Payments for the use of or the right to use scientific, technical, industrial or commercial knowledge or information or for the rendering of assistance or service in connection with the application or use of such knowledge or information;
  4. Payments of management fees;
  5. Rent or other payments for the use of any movable property;
  6. Payments for the purchase of real property from a non-resident property trader;
  7. Structured products (other than payments which qualify for tax exemption under section 13(1)(zj) of the Income Tax Act); 
  8. Distribution of real estate investment trust (REIT). 

Most of these payments are also covered under Section 12(6) and Section 12(7) of the Income Tax Act.
You may refer to this flowchart of withholding tax implications for such payments, General Overview of Withholding Tax on income deemed to be sourced in Singapore under Section 12(6) and 12(7) of the Income Tax (57KB).

Please refer to our FAQs below for specific scenarios.


Interest Payments

Withholding tax is applicable to any interest in connection with any loan, indebtedness or any arrangement or service related to any loan or indebtedness. Examples include interest on overdue trade accounts and interest on credit terms paid to a non-resident supplier. This tax applies even if the interest is treated as part of the seller's trade income (e.g. interest charged on late payment of the sale of goods). 

Payments in Respect of Interest Rate/ Currency Swap Arrangements

Examples where withholding tax is applicable:

  • There is a close nexus between the swap payments and the financing arrangement, for instance
    • The swap arrangement is directly connected with a financing arrangement and the counter parties for the two arrangements are the same. The swap payments and interest payments together give the true economic effect of a financing arrangement; or
    • The documentation shows explicitly that the swap arrangement is entered into to hedge a borrowing by the payer of the swap payments or the interest liabilities on such borrowing.
  • The economic substance of a swap arrangement is that of a loan or a financing arrangement.


The swap arrangement is not entered into in relation to any borrowing by the payer of the swap payments. However, if the arrangement is in substance a loan or financing arrangement of the payer of swap payments, no exception will be granted. This treatment is effective for any swap payments due and payable on or after 26 Nov 2010.

Payments in Respect of Non-Financial Derivatives

Non-financial derivatives are derivatives where the payoffs are linked in whole to the payoffs or performance of the underlying non-financial assets.

Such derivatives take the form of forward, futures, swap or options. Examples include commodity, emission and freight derivatives.

Withholding tax is not applicable to payments exchanged or made in respect of non-financial derivatives when:

  1. The derivative does not effectively give rise to the creation of any loan or indebtedness;
  2. The payment is not effectively a return for the use of money or provision of credit; and
  3. The payment made is at arm's length.

Payments for Software and Payments for Use of or Right to Use Information and Digitised Goods

The rights-based approach was adopted from 28 Feb 2013 to characterise the following payments for tax purposes:

These include payments for downloadable software, software bundled with hardware, software licences (e.g. site, enterprise or network), limited duration licensed software and software products with online elements.

These include subscriptions to Bloomberg, Reuters, Lexis-Nexis and other similar subscriptions. They exclude payments for the use or the right to use patents, trademarks, registered designs, geographical indications, the layout design of integrated circuits, plant varieties and trade secrets.

These include payments for online or downloadable ring tones, music videos, books, and other similar goods.

The rights-based approach characterises a payment based on the nature of the rights transferred in consideration for the payment. It draws a distinction between the transfer of a "copyright right" and the transfer of a "copyrighted article" from the owner to the payer.

A transaction involves the transfer of a copyright right if the payer is allowed to commercially exploit the copyright. The term 'commercially exploit' means to be able to:

  • reproduce, modify or adapt and distribute the software, information or digitised goods; or
  • prepare derivative works based on the copyrighted software program, information or digitised goods for distribution.

Where a payment is made to a copyright owner for the transfer of partial rights in the copyright (e.g. licensing of copyright to be exploited by the payer), the payment is a royalty . Such payments to non-residents are subject to withholding tax at 10% or the reduced rate as provided in an Avoidance of Double Taxation Agreement (DTA).

If the payment is made to the copyright owner for the complete alienation of his copyright in the goods, the transaction is a sale of the copyright. In the hands of the copyright owner, any gains derived from such sale constitute either his business income or capital gains. The sales proceeds paid to a non-resident are not subject to withholding tax.

Payments for software or digitised goods that do not involve the transfer of the copyright rights embedded in the goods will be considered as payments for copyrighted articles and are not subject to withholding tax.

For example, if a person purchases software for personal use or for use within his business operations, the payment he makes is a payment for a copyrighted article. Thus, withholding tax is not applicable. Payments for additional services such as subsequent software maintenance, user training, customisation of software or information, and development of add-on applications are not within the scope of the rights-based approach. Withholding tax may apply. Please refer to payment for services rendered. For more information, please refer to the e-Tax Guide, Rights-Based Approach for Characterising Software Payments and Payments for the Use of or the Right to Use Information and Digitised Goods (82KB).

Payments for Technical Services Under Section 12(7)(b) and Section 12(7)(c) of the Income Tax Act

The following rules apply to payment for services rendered:

  1. Where payment is made to a non-resident company for the installation of equipment, technical support services, training, consultancy or other services provided by the non-resident company, withholding tax is applicable on the service fees attributable to the work done in Singapore.
  2. If the payer pays for monthly allowance of the non-resident company's employees who are sent to Singapore to perform the services, withholding tax is applicable on the allowance as the monthly allowance is considered additional service fees paid to the non-resident company.
  3. However, if the non-resident company provides the services via electronic means from overseas (e.g. Internet presentation, email and telephone) without sending staff to Singapore, the services are rendered outside Singapore and withholding tax is not applicable.
  4. Where payment is made to a non-resident company for services rendered in Singapore under a cost-pooling arrangement, withholding tax is not applicable if the cost-pooling conditions stated in the e-Tax Guide “Transfer Pricing Guidelines (1.02MB)" have been satisfied such that 0% mark-up is acceptable. 
Withholding tax is imposed at the prevailing corporate tax rate on the gross service fees. This is not the final tax. If the non-resident company wishes to claim for the expenses incurred, it may forward the certified accounts and tax computation for IRAS' examination. When the net income and tax have been determined, any tax withheld in excess of the tax on the net income will be refunded.

If the company is a resident of a tax treaty partner, the Avoidance of Double Taxation Agreements (DTAs) may provide for relief from double taxation, depending on the provision of the DTA.

Administrative Concession - No Withholding Tax on the Reimbursement of  Accommodation, Meals and Transportation expenses

As an administrative concession, withholding tax is not applicable for reimbursement of, accommodation, meals and transportation expenses (including airfares) paid to a non-resident company if the payer can obtain a detailed breakdown of the expenses showing that the expenses were reimbursed at the actual costs incurred, without any mark-up or profit element. The payer need not submit the breakdown/ documents to IRAS but will need to retain them and submit to IRAS upon request.

Extension of administration concession to reimbursement of airfares and accommodation based on published rates

In situations where the employees of the non-resident company make multiple trips to Singapore, the payer would need to track and collate expenses for all the trips in order to avail itself of the administrative concession.

To ease the administrative burden of companies, the administrative concession is extended to the reimbursement of airfares and accommodation based on published rates of airlines and accommodation, provided that the following conditions are satisfied:

(a)       The contract with the foreign vendor provided for reimbursement of airfares and accommodation based on the published rates;

(b)       The published rates used for reimbursement purpose are reflective of the prevailing market rates of the airfares and accommodation costs. The reimbursement rates should be updated at least once in every 2 years if the tenure of the contract is more than 2 years; and

(c)       The reimbursement rates are supported by supporting documents, e.g. booking reservations of airlines and accommodation. The payers would be required to retain the relevant supporting documents and submit to IRAS only upon request.  

Management service refers to management or assistance in the management of any trade, business or profession. It includes routine support services as listed in Annex C of the e-Tax Guide “Transfer Pricing Guidelines (1.02MB)”.

As an administrative concession, IRAS will allow payers to apply a lower withholding tax on related party services performed in Singapore under Section 12(7)(b) and (c) if certain conditions are met.

You may refer to this flowchart (17KB) to determine whether withholding tax is applicable on management fees paid to non-residents for management services performed.

Payments for Use of Movable Property Under Section 12(7)(d) of the Income Tax Act

Rent or other payments made to non-resident persons for the use of movable property are subject to withholding tax under Section 12(7)(d) of the Income Tax Act.

Rent or other payments made for the use of movable property outside Singapore such as cars, hand phones, laptops and other similar items where such use is incidental to overseas business trips (including overseas trade fairs or exhibitions), are not payments falling within the scope of Section 12(7)(d). As such, withholding tax is not applicable.

This treatment has also been expanded, from 1 Apr 2014, to include rental of movable properties used for overseas representative offices. Payers are not required to withhold tax on such payments made on or after 1 Apr 2014. In this way, businesses are given greater support for efforts to explore and expand into overseas markets.

Real Estate Investment Trust (REIT) Distributions

REIT distributions to unit-holders who are non-resident non-individuals are subject to withholding tax of 10% or the prevailing corporate tax rate.

A non-resident non-individual is one who is not a resident of Singapore and:

  1. who does not have a permanent establishment in Singapore; or
  2. who carries on an operation in Singapore through a permanent establishment in Singapore, where the funds used to acquire the units in REIT are not obtained from that operation.

For more information, please refer to the e-Tax Guide on "Income Tax Treatment of Real Estate Investment Trusts"(672KB).

Payments for the Purchase of Real Property from Non-Resident Property Traders

A buyer of a real property or his solicitor is required to withhold tax on the purchase price of that real property upon completion of the sale if the seller is a non-resident property trader.

If the buyer is unsure whether the seller is considered a property trader for Singapore income tax purposes or not, the buyer or his solicitor may wish to ask for a letter of confirmation (not necessarily under oath) from the seller stating that he or the company has not been treated as a property trader for Singapore income tax purposes. With the letter of confirmation from the seller, the buyer or his solicitor is not required to withhold tax on the purchase price of the real property. The buyer or his solicitor is not required to submit the letter of confirmation to IRAS but will have to furnish the letter upon request.



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