Generally, local payers are required to withhold tax at the prevailing corporate tax rate of 17% on gross payments made to non-residents on services performed in Singapore that fall under Section 12(7)(b) and (c) of the Income Tax Act*.
As an administrative concession, companies are allowed to apply a lower withholding tax rate (i.e. lower than the prevailing corporate tax rate of 17%) on gross payment made for related party services performed in Singapore that fall under Section 12(7)(b) and (c) if certain conditions are met without the need to seek prior approval from IRAS.
This administrative concession will be withdrawn where the date of payment falls on or after 1 April 2018.
The date of payment is defined as the earliest of the following dates:
- When the payment is due and payable based on the agreement or contract, or the date of the invoice in the absence of any agreement or contract (credit terms should not be taken into consideration).
- When payment is credited to the account of the non-resident or any other account(s) designated by the non-resident.
- The date of actual payment.
According to the Inland Revenue Authority of Singapore (IRAS), this administrative concession is being withdrawn due to low adoption.
*Extract of Section 12(7) of the Income Tax Act:
12(7)(b) any payment for the use of or the right to use scientific, technical, industrial or commercial knowledge or information or for the rendering of assistance or service in connection with the application or use of such knowledge or information;
12(7)(c) any payment for the management or assistance in the management of any trade, business or profession;
Source: Inland Revenue Authority of Singapore (IRAS)