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Taxable Income of Non-Resident Professionals

Non-resident professionals are subject to 15% withholding tax on gross income. They may opt to be taxed at 22% of net income instead.
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15% Withholding Tax Treatment

The non-resident professional is subject to a final withholding tax of 15% on the gross income/fee derived from services performed in Singapore.

Under the 15% withholding tax treatment:

  1. Gross income refers to both cash and non-cash payments and includes:
    1. accommodation provided/reimbursed by payer;
    2. airfare provided/reimbursed by payer;
    3. allowance;
    4. honorarium/speaker's fee;
    5. per diem; and
    6. transport (e.g. airport transfers) and meals provided/reimbursed by payer
  2. No deduction is allowed against the gross income/fees for any expenses incurred;
  3. We will not send tax bill to the non-resident professional as the payer has accounted for the withholding tax; and
  4. The following are not applicable
    1. concession of not taxing accommodation provided for 60 days or less in any calendar year and cost of airfare
    2. tax exemption for short-term employment  of 60 days or less in a calendar year. 
Example 1: Withholding Tax paid by non-resident professional

The non-resident professional is engaged by a company to render services in Singapore for seven days. Besides an engagement fee of $5,000, the non-resident professional is also provided with hotel accommodation @ $200 a day and airfare of $2,000.

Gross Fees

$ 5,000

Accommodation ($200 x 7 days)

$ 1,400

Airfare

$ 2,000

Total Gross Income/Fees

$ 8,400

Final Withholding Tax @ 15%

$ 1,260

Example 2: Withholding Tax borne by the payer

The computation of withholding tax where the payer bears the tax for the non-resident professional would be based on the terms in the contract. Where the contract states that the non-resident professional would receive a net payment, free from any tax deduction or withholding (i.e. includes a tax clause), the withholding tax would be computed on a re-grossed basis.

The payer remains responsible for the payment of withholding tax which will be calculated at the rate of 15% of the re-grossed amount.

Under the terms of engagement, the income of $8,400 (as shown in example 1) is net of Singapore withholding tax. Hence, it is to be re-grossed at the rate of 15%:

$8,400 x 100% = $9,882.35
  85%*

Payer is required to account for withholding tax at the rate of 15% on the re-grossed amount: $9,882.35 x 15% = $1,482.35.

*100% - applicable tax rate

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Option to be Taxed on Net Income at 22% (20% for period of engagement prior to 1 Jan 2016)

The non-resident professional can opt to be taxed on the net income (i.e. gross fee less allowable expenses) at the non-resident rate of 22% instead of 15% of the gross income.

Under this option:

  1. As a concession, the following are not taxable:
    • cost of airfare borne by the payer and
    • cost of accommodation (excluding value of food) provided/reimbursed by the payer for short-term engagement of 60 days or less in a calendar year. Where the period of engagement is more than 60 days in the same calendar year, the cost of the accommodation is taxable. For example, engagement period was 70 days in a calendar year and accommodation was provided. The full cost of accommodation is taxable.
  2. Only expenses which are wholly and exclusively incurred by the non-resident professional in the production of the Singapore-sourced income and which are not reimbursed by the payer are tax deductible.
  3. As a concession, the following expenses incurred by the non-resident professional are deductible:
    • Cost of airfare and
    • Cost of accommodation (excluding value of food) for short-term engagement(s) with total period of 60 days or less in a calendar year. Where the total periods in one or more period of engagement(s) in the same calendar year exceeds 60 days, the full value of the accommodation is not deductible. For example, if the non-resident professional pays for the accommodation and the engagement period for the same calendar year was 70 days, the full value of the accommodation is not deductible.
  4. Private expenses (e.g. value of food and ground transfers from and to airport) and expenses incurred to put the non-resident professional in a position to earn the income (e.g. transport expenses incurred from hotel to venue of service and back) are not deductible.

We will not send tax bill to the non-resident professional as the payer has accounted for withholding tax.

 

Exercising Option to be Taxed on Net Income at 22%

This option is irrevocable and must be exercised on a per engagement basis. This means that all income and benefits from the same engagement are subject to withholding tax at 22%.

The option must be exercised:

  1. during the e-filing of the withholding tax by selecting the tax option to be taxed on net income at prevailing non-resident rate OR
  2. by the filing due date if tax at 15% has been remitted to IRAS*

*by 15th of the second month from the date of payment to the non-resident professional (for date of payment from 28 Nov 2013).

Example 3: Option to be taxed on net income

Payment to non-resident professional was made on 26 Jun 2018 and payer has already withheld tax of 15% and paid to IRAS on 15 Jul 2018. The non-resident professional or the payer (on behalf of the non-resident professional) can write to IRAS to exercise the option for 22% not later than 15 Aug 2018.

Example 4: Withholding Tax paid by the non-resident professional

The non-resident professional was engaged by a company to render services in Singapore for seven days. Besides an engagement fee of $5,000, the non-resident professional was also provided with hotel accommodation @ $200 a day and airfare of $2,000.

Gross Fees

$ 5,000

Accommodation ($200 x 7 days)# 

$ 1,400

Airfare# 

$ 2,000

Net Income/fees# 

$ 5,000

Final Withholding Tax @ 22%

$ 1,100

# cost of accommodation provided for engagement period(s) for 60 days or less in a calendar year and cost of airfare are not taxable as an administrative concession

Example 5: Withholding Tax borne by the payer

The computation of withholding tax where the payer bears the tax for the non-resident professional would be based on the terms in the contract. Where the contract states that the non-resident professional would receive a net payment, free from any tax deduction or withholding (i.e. includes a tax clause), the withholding tax would be computed on a re-grossed basis.

The payer remains responsible for the payment of the withholding tax which will be calculated at the rate of 22% of the re-grossed amount.

Under the terms of engagement, the income of $5,000 (as shown in example 4) is net of Singapore withholding tax. Hence, it is to be re-grossed at the rate of 22%:

$5,000 x 100% = $6,410.25
   78%*

Payer is required to account for the withholding tax at the rate of 22% on the re-grossed amount: $6,410.25 x 22% = $1,410.25.

*100% - applicable tax rate

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  • #1 The payer bears the Withholding Tax on my behalf. How is the Withholding Tax computed?

    To the extent that the amount (to be paid to the non-resident) is expressed as a net payment under the contractual terms, withholding tax would be computed based on a re-grossed basis. See Example 2 under 15% withholding tax treatment or Example 5 under Option to be taxed on net income at 22% for the computation.

  • #2 I am only provided with airfare and accommodation benefits for my engagement period that is less than 60 days. How is the Withholding Tax computed?

    You should opt to be taxed at 22% (20% for period of engagement prior to 1 Jan 2016) of net income. The cost of accommodation (for engagement period(s) 60 days or less per calendar year) and airfare are not taxable as a concession. The payer must still e-file the withholding tax to elect for the option even though withholding tax is not applicable.

  • #3 I am provided with per diem allowance for my accommodation (my engagement period(s)is 60 days or less per calendar year). Is it taxable under the option to be taxed on net income?

    Only cost of accommodation provided for short-term engagements of 60 days or less in a calendar year is not taxable under the option to be taxed on net income at 22%.

    In the case where per diem allowance is provided, the full per diem is subject to withholding tax. However, you may claim the actual amount expended for accommodation against your gross income if the period(s) of engagement is 60 days or less in the calendar year

  • #4 I received fees for some services rendered by me in Singapore. Separately, I am paid a retainer fee when I am outside Singapore. Are the payments subject to withholding tax?

    Yes, as the retainer fees are not income attributable to services performed outside Singapore, it is also subject to withholding tax in Singapore.

  • #5 Are service charge and GST for hotel and meals provided to non-resident professionals subject to withholding taxes?

    Yes, please include service charge and GST when computing withholding tax.

  • #6 How do I report the costs incurred on airfare and accommodation to IRAS to claim deductions?

    If you opt to be taxed at 22% of net income, you can submit details of the amount incurred on airfare and accommodation to us. There is no need to submit the receipts.

  • #7 I have incurred expenses on food and transport. Are these expenses tax-deductible?

    The withholding tax of 15% is a final tax on gross income/fees. No deduction will be allowed on any expenses incurred in the production of income. 

    Under the option to be taxed on net income at 22%, these expenses are not deductible against your income as they are private in nature.

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