In Singapore, withholding tax is a tax deducted at source on certain types of payments made to non-residents. The legal requirements regarding withholding tax include:

• Determining the type of payment that is subject to withholding tax, such as interest, royalties, technical service fees, management fees, etc.
• Identifying the tax residency status of the payee (whether they are a resident or non-resident for tax purposes).
• Calculating the withholding tax amount based on the prescribed tax rates or tax treaty rates, whichever is applicable.
• Withholding the tax amount from the payment made to the non-resident entity and remitting it to the Inland Revenue Authority of Singapore (IRAS) within the stipulated timeline.
• Filing the withholding tax return (Form IR37) with IRAS and issuing a withholding tax certificate (Form IR37A) to the payee.

Failure to comply with these legal requirements may result in penalties and interest imposed by IRAS.

In Singapore, several types of payments are subject to withholding tax. Some of the common types of payments subject to withholding tax include:

• Interest: Payments made as interest on loans, bonds, or other financial instruments are subject to withholding tax.
• Royalties: Payments made for the use of intellectual property rights such as copyrights, patents, trademarks, or industrial know-how are subject to withholding tax.
• Technical service fees: Payments made for technical or consultancy services provided by non-residents are subject to withholding tax.
• Management fees: Payments made for management or administrative services provided by non-residents are subject to withholding tax.
• Rent: Payments made for the use of movable properties such as machinery or equipment, or immovable properties such as buildings or land, are subject to withholding tax.
• Commission: Payments made as commission or fees for agency services are subject to withholding tax.
• Directors’ fees: Payments made as directors’ fees to non-resident directors are subject to withholding tax.
• Payments for construction, installation, or assembly projects: Payments made for construction, installation, or assembly projects carried out in Singapore are subject to withholding tax if the payee is a non-resident.

It’s important for businesses and individuals to be aware of these types of payments and the corresponding withholding tax rates to ensure compliance with Singapore tax regulations.

Under section 45 of Singapore’s Income Tax Act, individuals or companies in Singapore that make payments for certain services provided by non-residents are mandated to deduct and pay withholding tax.

This obligation extends to companies hiring non-resident employees, requiring them to withhold tax from the remuneration paid to these employees.