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:
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.
$ 5,000
Accommodation ($200 x 7 days)
$ 1,400
Airfare
$ 2,000
Total Gross Income/Fees
$ 8,400
Final Withholding Tax @ 15%
$ 1,260
If the payer bears the tax for the non-resident professional under contractual terms (i.e. payment to payee is treated as net of tax), 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
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:
We will not send tax bill to the non-resident professional as the payer has accounted for withholding tax.
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:
*by 15th of the second month from the date of payment to the non-resident professional (for date of payment from 28 Nov 2013).
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.
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
Accommodation ($200 x 7 days)#
Airfare#
Net Income/fees#
Final Withholding Tax @ 22%
$ 1,100
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.
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.
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.
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
Yes, as the retainer fees are not income attributable to services performed outside Singapore, it is also subject to withholding tax in Singapore.
Yes, please include service charge and GST when computing withholding tax.
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.
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.