Certain payments made to non-resident companies are exempt from Singapore withholding tax.
Types of Payment
There is no need to withhold tax on dividend payments, even if there are withholding tax rates ascribed to dividends in some of our Avoidance of Double Taxation Agreements (DTAs). Singapore currently does not impose withholding tax on dividends.
Payments for Satellite Capacity & the Use of International Submarine Cable Capacity, Including Payments for Indefeasible Rights of Use (IRUs)
This withholding tax exemption does not apply to payments that are:
- Treated as income earned by any trade or business carried on or exercised by a non-resident person in Singapore; or
- Effectively connected with a permanent establishment in Singapore.
Payments for Satellite Capacity
Payments for satellite capacity are characterised as payments for services instead of payments for the use of movable properties. Payers are recognised as not having possession or control over the satellites. Payers therefore need not withhold tax on payments to non-residents for the use of satellite capacity since the services are rendered outside Singapore.
Payments for the Use of International Submarine Cable Capacity, Including Payments for IRUs
Payments for the use of international submarine cable capacity (except for payments made under IRU agreements) are characterised as payments for services. Withholding tax is therefore not applicable if the payment is made to a non-resident who performs the services outside Singapore.
The above characterisation does not apply to payments for the use of international submarine cable capacity made under IRU agreements, as payers under such arrangements possess significant control over the physical cables as well as the management and maintenance of the cables. Withholding tax remains applicable on such payments made to non-residents. However, tax exemption is granted on such payments made up to 31 Dec 2028* (date inclusive).
Payments for the Charter of Ships
Withholding tax is exempted on payments made to non-residents, excluding permanent establishments in Singapore, for bareboat, voyage and time charters of ships. This exemption further enhances Singapore's competitiveness as an International Maritime Centre and reduces business costs for ship charterers.
For charter payments made to permanent establishments in Singapore, payers do not need to withhold tax. The permanent establishment is taxed on such fees and has to declare the charter fees received in its annual Corporate Income Tax Return.
Payments for the Use of a Container for Carriage of Goods by Sea
Withholding tax is exempted on container lease payments made to non-resident lessors (excluding payments derived from any operation carried on by the non-resident through its permanent establishment in Singapore) under an operating lease agreement entered into on or before 31 Dec 2027 for the use of qualifying containers1 for the carriage of goods by sea.
Payments Made by Banks, Finance Companies & Certain Approved Entities
To facilitate access to a wider range of funding sources for the lending business of specified entities and to strengthen our position as a regional funding centre, all Section 12(6) payments made by banks, finance companies and certain approved entities (collectively referred to as 'specified entities1') for their trade or business to non-resident persons (excluding permanent establishments in Singapore) are exempt from withholding tax.
The withholding tax exemption is effective for:
- Payments liable to be made during the period from 1 Apr 2011 to 31 Dec 2026 (both dates inclusive) on contracts which took effect before 1 Apr 2011; and
- Payments liable to be made on contracts which take effect during the period from 1 Apr 2011 to 31 Dec 2026 (both dates inclusive).
To enhance the withholding tax exemption regime, a waiver of withholding tax was granted on Section 12(6) payments made by specified entities for their trade or business to any permanent establishments in Singapore2.
This waiver to withhold tax is effective for:
- Payments liable to be made during the period from 17 Feb 2012 to 31 Dec 2026 (both dates inclusive) on contracts which took effect before 17 Feb 2012; and
- Payments liable to be made on contracts which take effect during the period from 17 Feb 2012 to 31 Dec 2026 (both dates inclusive).
1 Specified entities refer to:
- Banks or merchant banks licensed under the Banking Act 1970;
- Finance companies licensed under the Finance Companies Act 1967; and
- Entities that are:
- Holding a Capital Markets Services Licence under the Securities and Futures Act 2001 to carry out the regulated activities of dealing in capital markets products and advising on corporate finance;
- Involved or will be involved in the underwriting of debt or equity issuances; and
- Approved by MAS for the purpose of the tax exemption.
2 Permanent establishments in Singapore continue to be assessed to tax on the Section 12(6) payments which they received from specified entities and are required to declare such payments in the income tax return, unless the payments are specifically exempt from tax under the Income Tax Act 1947.
Payments to Singapore Branches of Non-Resident Companies
Withholding tax is waived for all payments under Sections 12(6) and 12(7) of the Income Tax Act 1947 which are made to Singapore branches of non-resident companies. Examples of such payments are interest, commission, royalties or management fees.
The waiver is intended to reduce compliance costs of payers making payments to Singapore branches of non-resident companies.
Singapore branches of non-resident companies are, however, still taxed on such payments and are required to declare them in their annual Corporate Income Tax Returns.
Section 12(6) Payments on Interbank/ Interbranch Transactions
All Section 12(6) payments made by banks in Singapore to their branches/ head offices outside Singapore or another bank outside Singapore are exempt from tax. Hence, banks in Singapore do not need to withhold tax when making Section 12(6) payments to their branches/ head offices outside Singapore or another bank outside Singapore.
The exemption applies to:
- Section 12(6) payments that are made on contracts that take effect from 1 Apr 2021 to 31 Dec 2031 (both dates inclusive); and
- Section 12(6) payments that are made from 1 Apr 2021 to 31 Dec 2031 (both dates inclusive) on contracts that take effect before 1 Apr 2021.
Does my company have to file Form IR37 on behalf of a non-resident payee for payments which are exempt from tax?
Filing of Form IR37 is not required for payments that have been granted exemption from tax under Singapore tax laws.
However, if the payment is exempt from tax under an Avoidance of Double Taxation Agreement (DTA) that Singapore has concluded with the payee's country/ territory of residence and the payee is claiming tax exemption under the DTA, filing of Form IR37 is required.
Learn how to claim relief/ exemption under DTA.
Do payments made to Singapore branches of non-resident companies for the performance of construction contracts in Singapore qualify for the waiver of withholding tax (announced in Budget 2014)?
Withholding tax is waived for all payments under Sections 12(6) and 12(7) of the Income Tax Act 1947 which are made to Singapore branches of non-resident companies. Payments for the performance of construction contracts in Singapore are not necessarily payments under Section 12(6) or 12(7).
For collection of tax due, IRAS may appoint the payer to be the agent of the Singapore branch of the non-resident company under Section 57 of the Income Tax Act 1947. The appointed agent is required to deduct the tax due from each progress payment to the Singapore branch. However, where the Singapore branch files a Corporate Income Tax Return (Form C), IRAS will not appoint the local payer to be a collecting agent for the purpose of advance deduction of tax.