Withholding tax is a mechanism to collect income tax from certain groups of non-residents and is an area often overlooked by businesses. With the rise of cross border transactions, it is therefore important for businesses to understand the practical application of withholding tax to avoid penalties and minimise their tax burden.
Among the taxes collected by the Inland Revenue Authority of Singapore (IRAS), withholding tax registered the second highest percentage year-on-year increase in revenue collection by the IRAS. The total withholding tax collection for the financial year ended 31 March 2022 amounted to S$1.9 billion. This represented an increase of 18.75% over the previous year’s collection.
This workshop is designed specifically to give Accounting and Tax Professionals a practical knowledge of withholding tax. You will also learn about the concept of permanent establishment and gain a basic understanding of some articles in tax treaty. Personnel involved in tax compliance of the company and project costing will also find the workshop useful.
A Highlight of Key Areas:
Overview of withholding tax system
Who are non-resident companies and individuals
Transactions that are subject to withholding tax
- Applicable sections in Singapore Income Tax Act – treatments of payments of interest, royalties, service fees, etc.
- Payment to non-resident professionals
- Rights-based approach for characterising software payments and payments for the use of or the right to use information and digitised goods
Exemptions and remissions
Withholding tax rate
Application of tax treaties
- Concept of Permanent Establishment (“PE”)
- Types of PE
- PE and implication to withholding tax
- Various articles in a tax treaty (e.g. business profits, royalties and interest articles, etc.)
- Claiming exemptions or reduced rates under the tax treaties
- Certificates of residence
Withholding tax compliance and administration
- Timing of withholding and payment to IRAS
- Calculation
- Who bears the withholding tax
- When payment is in foreign currency
- Deductibility of withholding tax on interest borne by companies on behalf of non-residents
- Withholding tax forms
- Penalties for non-compliance
- Voluntary disclosure
Tax clauses in agreements – tax gross up and tax indemnity clause
Foreign tax credit/Pooling
Case studies on application of withholding tax provisions