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On 29 April 2022, the Inland Revenue Authority of Singapore (IRAS) updated guidance on the withholding tax rules for payments to non-resident companies. The update includes notes on the withdrawal of certain exemptions with effect from 1 November 2022 in relation to:
- Payments for services rendered under a cost-pooling arrangement;
- Reimbursement of accommodation, meals, and transportation expenses; and
- Payments made to a non-resident head office for management, administration, human resource, and financial services if the amount paid is an allocation or reimbursement of expenses.
1. Payments for Services Rendered
Where payment is made to a non-resident company for the installation of equipment, technical support services, training, consultancy or other services provided by the non-resident company, withholding tax is applicable on the service fees attributable to the work done in Singapore.
However, if the non-resident company provides the services via electronic means from overseas (e.g. internet presentation, email and telephone) without sending staff to Singapore, the services are rendered outside Singapore and withholding tax is not applicable.
With effect from 1 Nov 2022, this specific exemption will be withdrawn. Withholding tax will be applicable to any cost reimbursement payment liable to be made on or after 1 Nov 2022 to a non-resident related party, even if the payment is made under a cost-pooling arrangement.
2. Reimbursement of Accommodation, Meals and Transportation Expenses
As an administrative exemption, withholding tax is not applicable to the reimbursement of accommodation, meals and transportation expenses (including airfares) liable to be paid to a non-resident company on or before 31 Oct 2022.
With effect from 1 Nov 2022, this administrative concession will be withdrawn. Withholding tax will be applicable to any cost reimbursement of accommodation, meals and transportation expenses liable to be paid on or after 1 Nov 2022 to a non-resident company.
3. Payments made to a non-resident head office for management, administration, human resource and financial services as an allocation or reimbursement of expenses
Currently the withholding tax is not applicable on reimbursement/ allocation of management fees (without profit element) between a head office and branches. With effect from 1 Nov 2022, withholding tax will be applicable to any cost reimbursement payment related to management, administration, human resource and financial services made to a non-resident entity.
Our advisors can help your business streamline tax obligations and identify incentives you may be eligible for, so please do not hesitate to contact us at contact@orbis-alliance.com.