Getting To Know Withholding Tax And Its Implications
Every citizen is bound to pay taxes to the country where he or she resides and works. When there is such a responsibility kept on a person, the people who are dealing with this person also have to ensure that the necessary tax is being paid. Withholding tax is one way of ensuring this. Some many non-resident individuals and companies are working in Singapore and earning an income. When such entities are paid, a portion of the payment made has to be held back and paid to the IRAS. This is called withholding tax. Companies in Singapore can use the withholding tax services in Singapore provided by consultants to ensure proper compilation and reporting to the IRAS.
Take The Help Of Withholding Tax Services To Remain Compliant
The tax consultants in Singapore can help you greatly in understanding and paying the tax amount to the IRAS. There are certain kinds of payments that attract withholding tax. This tax applies only to companies or individuals for the income that they receive in Singapore. The income received by these people outside Singapore doesn’t attract any tax. This tax is applicable only for payments made to non-resident companies, individuals, agents or professionals who are working in Singapore. The payments that will attract withholding tax are specifically mentioned in the Income Tax Act of the country and this must be followed strictly.
Non-resident companies may extend credit facilities to the resident companies in Singapore. The credit amount will attract interest. When this interest is paid to the non-resident company, the payer must reduce withholding tax. In the same manner, any fee that is given to get a commission or a loan will also be subject to withholding tax. Such a rate of withholding tax will be 15%. Withholding tax must be paid for royalties given to a non-resident entity. This will be paid at the corporate tax rate or as a percentage of the royalty amount. If there is any amount paid for the use of knowledge of a person that will also be subject to a withholding tax of 10%. The same percentage will apply to fees paid to a non-resident for his or her skills.
Withhold tax may be collected from some resident companies or individuals for management services if there is a double-taxation agreement between the countries. The tax percentage will be the corporate tax rate prevailing at that time. When payments are made to a foreign company for technical support, installation of machinery, training or consultancy purposes withholding tax must be deducted from the payment. If the same services are rendered from a remote location via the internet then the tax is not applicable.
A withholding tax of 15% is charged on rent paid to non-resident companies for leasing of movable property. Any withholding that is charged at the existing rate of corporate tax can be reduced by providing proof for expenses incurred in Singapore. The certified accounts carrying these expenses must be submitted to the IRAS to claim the refund.
Withholding Tax Collected From Non-Resident Professionals
Any person is considered to be non-resident if he or she has stayed in Singapore for below 183 days. Certain professionals arrive in Singapore to render their services in the country. These persons don’t work as employees in any company. They work under a contract and their work is undertaken independently. These people will also be affected by withholding tax for the payment that they received for the said services. The tax will be deducted from any income that they earn which will include the wages that are paid to them, expenses that are reimbursed and professional fees.
The professionals that will be affected by the withholding tax include coaches, trainers, and consultants. This will also include public performers such as entertainers and speakers who receive a fee for their service. Academics holding seminars or workshops, technical experts or consultants for government bodies and specialists in particular fields come under the gambit of the withholding tax. The withholding tax for such people is 15% of their gross income, but there are certain exceptions.
Any payment made to a non-resident company director is subject to a withholding tax of 22%. This will include the director’s fees, salary, reimbursement of rent, bonus, earnings from stocks and shares, and any other payment made to the director. The withholding tax for payments made to a public entertainer for the period up to 31 March 2020 has been reduced to 10%.
Companies that are based in countries that have a double-taxation avoidance agreement with Singapore can avail of a reduced withholding tax for their services which are rendered in Singapore. This will depend on the service that is rendered and also on the terms of the double-taxation agreement between the country and Singapore.
When Should You File The Withholding Tax Returns?
IRAS has the facility for you to file your withholding tax report online. You can file it electronically on the website for withholding tax. The filing of withholding tax form and the payment must be made before the 15th of the month that falls second to the date when payment has been given to the non-resident. If payment is made in January and the tax withheld, then the e-filing of the tax form and the payment of tax to the IRAS must be made before the 15th of March.
There are specific guidelines for determining the date when the payment is done. The payer cannot take credit terms when considering the filing and payment of withholding tax. The due date of payment as per a written contract of the agreement must be taken as the date of payment. When there is no agreement or contract, the payment date will be the date when the invoice is prepared.
The date when the payment is made is also considered. When it comes to payment of directors’ fees, the date on which the resolution is passed for the payment is considered as the date of payment. It must be noted that the company must take the earliest date of any of the above when considering for filing of the withholding tax form and paying the same.