In Singapore, a withholding tax is a very crucial tax which is applicable when doing business with foreigners. The taxation act of Singapore stipulates that whenever a resident or individual makes payment to non-local enterprises or people then a portion of the money is taken and given to the Singapore Inland Revenue Authority (IRA).
Withholding tax is applicable to numerous types of payment in Singapore. All these payments are mentioned under section 45 of the Singapore tax act. As such all payments listed under this section must comply with withholding tax. Some of the disbursements highlighted under section 45 include foreign companies, professionals, artists who perform in public, and directors.
Detailed explanation of the types of payments subjected to withholding tax
Doing financial business with non-resident professionals
Foreign professionals are experts from a given field who opt to practice they profession autonomously for at most 183 days a year under a service contract. People categorized as foreign professionals include foreign representatives, specialists, consultants and permanent workers of a non-resident firm. In this case 15% of the gross salary is taxed and remitted by the employer to IRA. Alternatively if the foreign professional decides to be taxed on net income, then 20% is withheld as the non-resident tax. Note that the 20% is only applicable when tax is made on the net and not gross income.
Payments made to foreign public performers or entertainers
Entertainers are classified into two the usual public artistes and sportsmen or women. Public artists comprise musicians, singers, actors and dancers while sports people include mostly athletes. A foreign entertainer or performer will only be considered non-resident if he/she has been in Singapore for not more than 183 days in a year. Just as with foreign experts, entertainers are also required to remit 20% of their gross income. In addition the newly implemented law stipulates that once payment is due and ready, then the person paying should pay a tax of 10% of the gross income. This law is applicable as of 22nd February, 2010 to 31st March, 2015.
Payments disbursed to directors from abroad
Foreign directors are grouped into two, a non-resident director who is part of the board of...