15% Withholding Tax Treatment
The non-resident professional is subject to a final withholding tax of 15% on the gross income/fee derived from services performed in Singapore.
Under the 15% withholding tax treatment:
- Gross income refers to both cash and non-cash payments and includes:
- accommodation provided/reimbursed by payer;
- airfare provided/reimbursed by payer;
- allowance;
- honorarium/speaker's fee;
- per diem; and
- transport (e.g. airport transfers) and meals provided/reimbursed by payer
- No deduction is allowed against the gross income/fees for any expenses incurred;
- We will not send tax bill to the non-resident professional as the payer has accounted for the withholding tax; and
- The following are not applicable
- concession of not taxing accommodation provided for 60 days or less in any calendar year and cost of airfare
- tax exemption for short-term employment of 60 days or less in a calendar year.
Example 1: Withholding Tax paid by non-resident professional
The non-resident professional is engaged by a company to render services in Singapore for seven days. Besides an engagement fee of $5,000, the non-resident professional is also provided with hotel accommodation @ $200 a day and airfare of $2,000.
| Gross Fees | Accommodation ($200 x 7 days) | Airfare | Total Gross Income/Fees | Final Withholding Tax @ 15% |
|---|---|---|---|---|
$ 5,000 | $ 1,400 | $ 2,000 | $ 8,400 | $ 1,260 |
Example 2: Withholding Tax borne by the payer
If the payer bears the tax for the non-resident professional under contractual terms (i.e. payment to payee is treated as net of tax), the withholding tax would be computed on a re-grossed basis.
The payer remains responsible for the payment of withholding tax which will be calculated at the rate of 15% of the re-grossed amount.
Under the terms of engagement, the income of $8,400 (as shown in example 1) is net of Singapore withholding tax. Hence, it is to be re-grossed at the rate of 15%:
$8,400 x 100% = $9,882.35
85%*
Payer is required to account for withholding tax at the rate of 15% on the re-grossed amount: $9,882.35 x 15% = $1,482.35.
*100% - applicable tax rate
Option to be Taxed on Net Income at 22% (24% for income due and payable to the non-resident professional with effect from 1 Jan 2023)
The non-resident professional can opt to be taxed on the net income (i.e. gross fee less allowable expenses) at the non-resident rate of 22% (24% for income due and payable to the non-resident professional with effect from 1 Jan 2023) instead of 15% of the gross income.
Under this option:
Income Due and Payable To The Non-resident Professional On Or Before 31 Oct 2022
Income
- As a concession, the following are not taxable:
- cost of airfare borne by the payer and
- cost of accommodation (excluding value of food) provided/reimbursed by the payer for short-term engagement of 60 days or less in a calendar year. Where the period of engagement is more than 60 days in the same calendar year, the cost of the accommodation is taxable. For example, engagement period was 70 days in a calendar year and accommodation was provided. The full cost of accommodation is taxable.
Expenses
- Only expenses which are wholly and exclusively incurred by the non-resident professional in the production of the Singapore-sourced income and which are not reimbursed by the payer are tax deductible.
Private expenses (e.g. value of food and ground transfers from and to airport) and expenses incurred to put the non-resident professional in a position to earn the income (e.g. transport expenses incurred from hotel to venue of service and back) are not deductible. - As a concession, the following expenses incurred by the non-resident professional are deductible:
- Cost of airfare and
- Cost of accommodation (excluding value of food) for short-term engagement(s) with total period of 60 days or less in a calendar year. Where the total periods in one or more period of engagement(s) in the same calendar year exceeds 60 days, the full value of the accommodation is not deductible. For example, if the non-resident professional pays for the accommodation and the engagement period for the same calendar year was 70 days, the full value of the accommodation is not deductible.
Income Due and Payable To The Non-resident Professional On Or After 1 Nov 2022
NEW The above administrative concessions in paragraphs 1 and 3 will be withdrawn for income due and payable to the non-resident professional on or after 1 Nov 2022. With the withdrawal, the following rules apply:
(a) Taxability of Income
- Cost of airfare borne by the payer and cost of accommodation provided/reimbursed by the payer - Such income that is due and payable to the non-resident professional from 1 Nov 2022 onwards will be taxable, regardless of the period of engagement in a calendar year.
(b) Deductibility of Expenses
- Only expenses which are wholly and exclusively incurred by the non-resident professional in the production of the Singapore-sourced income, and not private or capital in nature, are tax deductible. Private expenses such as value of food are not deductible.
- The costs of airfare and accommodation (excluding value of food) incurred by the non-resident professional in respect of income due and payable on or after 1 Nov 2022 will be deductible against the gross income of the non-resident professional,
regardless of the period of engagement in a calendar year. This is provided that the following conditions are met:
- The non-resident professional’s principal place of business is outside Singapore;
- The non-resident professional was carrying on the same activity prior to his trip to Singapore; and
- The sole purpose of the non-resident professional’s trip to Singapore is to perform the services in Singapore.
- Business expenses such as cost of ground transfers from and to airport and transport from hotel to venue of service and back are deductible against the gross income of the non-resident professional.
We will not send tax bill to the non-resident professional as the payer has accounted for withholding tax.
Exercising Option to be Taxed on Net Income at 22%
This option is irrevocable and must be exercised on a per engagement basis. This means that all income and benefits from the same engagement are subject to withholding tax at 22%.
The option must be exercised:
- during the e-filing of the withholding tax by selecting the tax option to be taxed on net income at prevailing non-resident rate OR
- by the filing due date if tax at 15% has been remitted to IRAS*
*by 15th of the second month from the date of payment to the non-resident professional (for date of payment from 28 Nov 2013).
Example 3: Option to be taxed on net income
Example 4: Withholding Tax paid by the non-resident professional
The non-resident professional was engaged by a company to render services in Singapore for seven days. Besides an engagement fee of $5,000, the non-resident professional was also provided with hotel accommodation @ $200 a day and airfare of $2,000.
(a) Income due and payable to the non-resident professional on or before 31 Oct 2022
| Gross Fees | Accommodation ($200 x 7 days)# | Airfare# | Net Income/fees# | Final Withholding Tax @ 22% |
|---|---|---|---|---|
| $ 5,000 | $ 1,400 | $ 2,000 | $ 5,000 | $ 1,100 |
# cost of accommodation provided for engagement period(s) for 60 days or less in a calendar year and cost of airfare are not taxable as an administrative concession on or before 31 Oct 2022
(b) Income due and payable to the non-resident professional on or after 1 Nov 2022
| Gross Fees | Accommodation ($200 x 7 days)# | Airfare# | Net Income/fees# | Final Withholding Tax @ 22% |
|---|---|---|---|---|
| $ 5,000 | $ 1,400 | $ 2,000 | $ 8,400 | $ 1,848 |
# With effect from 1 Nov 2022, the administrative concession to exclude the cost of accommodation provided for engagement period(s) for 60 days or less in a calendar year and cost of airfare from tax, will be withdrawn.
Example 5: Withholding Tax borne by the payer
If the payer bears the tax for the non-resident professional under contractual terms (i.e. payment to payee is treated as net of tax), the withholding tax would be computed on a re-grossed basis.
The payer remains responsible for the payment of the withholding tax which will be calculated at the rate of 22%# of the re-grossed amount.
Under the terms of engagement, the income of $8,400 (as shown in example 4b) is net of Singapore withholding tax. Hence, it is to be re-grossed at the rate of 22%#:
$8,400 x 100% = $10,769.23
78%*
Payer is required to account for the withholding tax at the rate of 22%# on the re-grossed amount: $10,769.23 x 22%# = $2,369.23.
*100% - applicable tax rate
#24% for income due and payable to the non-resident professional with effect from 1 Jan 2023
FAQs
#1 The payer bears the Withholding Tax on my behalf. How is the Withholding Tax computed?
To the extent that the amount (to be paid to the non-resident) is expressed as a net payment under the contractual terms, withholding tax would be computed based on a re-grossed basis. See Example 2 under 15% withholding tax treatment or Example 5 under Option to be taxed on net income at 22% for the computation.
#2 I am only provided with airfare and accommodation benefits for my engagement period that is less than 60 days. How is the Withholding Tax computed?
(a) Income due and payable to non-resident professional on or before 31 Oct 2022
You should opt to be taxed at 22% of net income. The cost of accommodation (for engagement period(s) 60 days or less per calendar year) and airfare are not taxable as a concession. The payer must still e-File the withholding tax to elect for the option even though withholding tax is not applicable.
(b) Income due and payable to the non-resident professional on or after 1 Nov 2022
The cost of airfare borne by the payer and cost of accommodation provided/reimbursed by the payer that is due and payable to the non-resident professional from 1 Nov 2022 onwards will be taxable, regardless of the period of engagement in a calendar year. The payer must e-File the withholding tax.
#3 I am provided with per diem allowance for my accommodation (my engagement period(s) is 60 days or less per calendar year). Is it taxable under the option to be taxed on net income?
(a) Income due and payable to the non-resident professional on or before 31 Oct 2022
Only cost of accommodation provided for short-term engagements of 60 days or less in a calendar year is not taxable under the option to be taxed on net income at 22%.
In the case where per diem allowance is provided, the full per diem is subject to withholding tax. However, you may claim the actual amount expended for accommodation against your gross income if the period(s) of engagement is 60 days or less in the calendar year.
(b) Income due and payable to non-resident professional on or after 1 Nov 2022
The full per diem is subject to withholding tax. However, the costs of airfare and accommodation (excluding value of food) incurred by you in respect of income due and payable on or after 1 Nov 2022 may be deductible against your gross income, regardless of the period of engagement in a calendar year. This is provided that the following conditions are met:
i. Your principal place of business is outside Singapore;
ii. You were carrying on the same activity prior to your trip to Singapore; and
iii. The sole purpose of your trip to Singapore is to perform the services in Singapore.
#4 I received fees for some services rendered by me in Singapore. Separately, I am paid a retainer fee when I am outside Singapore. Are the payments subject to withholding tax?
#5 Are service charge and GST for hotel and meals provided to non-resident professionals subject to withholding taxes?
#6 How do I report the costs incurred on airfare and accommodation to IRAS to claim deductions?
#7 I have incurred expenses on food and transport. Are these expenses tax-deductible?
Under the option to be taxed on net income at 22%, these expenses are not deductible against your income as they are private in nature.