8 January 2015

The Inland Revenue Authority of Singapore (“IRAS”) has updated its website content on “Withholding Tax > FAQs (For payments made to non-resident companies) – Services”. The update relates to clarification on withholding tax on payments to non-residents in respect of services rendered in Singapore.

Generally,where a Singapore company makes a payment to a non-resident for services rendered in Singapore, that payment will be subject to withholding tax even if that payment is on a cost reimbursement basis (i.e. with 0% mark-up).  The updated content clarifies that no withholding tax is applicable on costs reimbursements between related parties for services rendered in Singapore if such cost reimbursements are in respect of the services listed in Annex A of the e-Tax Guide  ‘Transfer Pricing Guidelines for Related Party Services’. An added condition is that such cost reimbursements must satisfy the cost-pooling conditions stated in the said e-Tax Guide such that 0% mark-up is acceptable.

Prior to this update, only management fees paid to non-residents, for services rendered in Singapore, that represented a cost reimbursement between related parties under a cost-pooling arrangement (i.e. the cost pooling conditions as per the e-Tax Guide  ‘Transfer Pricing Guidelines for Related Party Services’ are satisfied) were exempted from withholding tax.

This update was done on 26 November 2014.

Source: Inland Revenue Authority of Singapore