25 February 2013

With effect from 28 February 2013, withholding tax will no longer be applicable on the following payments made to non-residents following the new characterisation of such payments:

• Payments for satellite capacity, and
• Payments for the use of international submarine cable capacity, except for payments made under Indefeasible Rights of Use (IRU) agreements.

Payments for Satellite Capacity

From 28 February 2013, payments for satellite capacity will be characterised as payments for services. This is in recognition that payers generally do not have material possessory interest or control over the satellites. Accordingly, payments for satellite capacity are more akin to payments for services than payments for the use of movable properties. With the new characterisation, withholding tax rules will not apply to payments made to non-residents for the use of satellite capacity since such services are rendered outside Singapore.

Payments for the use of international submarine cable capacity

From 28 February 2013, payments for the use of international submarine cable capacity (except for payments made under IRU agreements) will be characterised as payments for services. With the new characterisation, withholding tax rules will not apply to payments made to non-residents who perform the services outside Singapore.

The new 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 rules remain applicable to such payments made to non-residents. However, the existing withholding tax exemption for payments accruing in or derived from Singapore will be extended for another 5 years, from 28 Feb 2013 to 27 Feb 2018 (both dates inclusive).

Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website.