2 July 2014
The IRAS has updated the withholding tax forms that must be completed by a payer who has made or is deemed to have made a payment to a non-resident(s) that are subject to withholding tax under the Income Tax Act. One particular change made to Form IR37 is highlighted below:
Form IR37 is to be completed for payments made to non-residents under Sections 45/45A/45B/45C/S45G/S45H of the Income Tax Act such as interest, commission, royalties, charter fees, rents for movable property and director’s remuneration. A new annex has been added in the revised Form IR37 to allow the payer to obtain a written declaration from the non-resident payee as to whether the income that is subject to withholding tax is derived from any trade, business, profession or vocation carried on by the payee through a fixed place of operation in Singapore. If there is a positive confirmation, the payer cannot apply any applicable reduced withholding tax rates provided for under Section 43(3) of the Income Tax Act.
It is not mandatory for the payer to obtain the declaration and a submission of the declaration to the IRAS is not required. However, the new annexe provides an avenue for the payer to seek the confirmation as the payer may not have all the relevant information at hand to determine if the payer had derived the income through any trade, business, profession or vocation carried on by the payee through a fixed place of operation in Singapore. As such, it will be a good record keeping practice for businesses to obtain the declaration especially in cases of payments to non-related parties. As to what constitutes a “fixed place” of operation in Singapore, payers should refer to the definition of “permanent establishment” in Section 2 of the Income Tax Act.
The updated forms are available on-line at www.iras.gov.sg