IRAS updates website content on withholding tax

4 March 2016

The Inland Revenue Authority of Singapore (IRAS) has updated its website for guidelines on withholding tax.

Withholding tax is a form of levy placed on payments made to non-resident tax entities including companies, employees, business partners and overseas agents. A person has a legal obligation to withhold a percentage of the payment and pay the amount withheld to the Inland Revenue Authority of Singapore (IRAS), when payments of a specified nature under the Income Tax Act are made to a non-resident.

Any applicable withholding tax has to be deducted and paid to the IRAS, together with the completed Form IR37/A/B/C/D, by the 15th of the second month following the date of payment to the non-resident. Failure to do so will result in the imposition of late payment penalties.

For payments before 1 July 2012, Form IR37/A/B/C/D has to be filed and withholding tax paid by the 15th of the following month from the date of payment to the non-resident.

IRAS has clarified that the date of payment refers to the earliest of the following dates:

  • when the liability to pay the income arises (i.e. the income is due and payable) in accordance with the terms of the agreement/contract. In the absence of an agreement/contract, the date of the invoice is regarded as the deemed date of payment,
  • when the income is credited to the account of the non-resident person (or reinvested, accumulated, capitalised or carried to any reserve or any other account however designated, or otherwise dealt with on its behalf), and
  • when actual payment of the income is made.

If the withholding tax payment is not submitted to IRAS by the due date, a Demand Note will be issued, and a penalty of 5% will be imposed. Payment has to be made within one month to avoid further enforcement actions such as:

  • Appointing the taxpayer’s bank, employer, tenant or lawyer as agent to pay the outstanding money to IRAS,
  • Take legal action.

If the withholding tax payment is not settled within 30 days from the due date, an additional penalty of 1% will be imposed on the withholding tax for each completed month that the tax remains outstanding. The maximum additional penalty imposed cannot exceed 15%.

IRAS is however prepared to waive or reduce the penalty to 5% for first-time voluntary disclosures that meet the conditions of the IRAS Voluntary Disclosure Program.

For further reading, please refer to the IRAS website under the headings of:

  • Beginners’ guide to withholding tax
  • Late payment or non-payment of taxes
  • Withholding tax
  • When to file and pay withholding tax

The above updates had been made by IRAS on 24 and 25 February 2016.

Source: IRAS