Introduction
If your business works with overseas vendors, let’s say freelancers or service providers, you have probably heard of withholding tax. It’s one of those things that doesn’t come up until you are asked to deal with it, and then suddenly, it’s urgent.
Now, if you are doing business in Singapore, this is especially important in 2025. The IRAS (that’s Singapore’s tax authority) is putting a bigger spotlight on withholding tax, especially for payments made to non-resident companies or individuals.
They are serious about it as the rates have changed, some exemptions have been extended, and filing deadlines are tighter.
It might sound complicated but don’t worry, we will break it all down together: what payments are affected, when and how to file, and what you really need to stay on top of this year. Let’s make withholding tax in Singapore a little less intimidating.
What is Withholding Tax in Singapore?
When your business in Singapore pays certain types of money, like interest, royalties, or service fees, to someone who is not based in Singapore, you might need to hold back a portion of that payment and send it to IRAS. That’s what we call withholding tax.
Why? Well, it is basically Singapore’s way of making sure non-residents still pay tax on the income they earn from Singapore, even if they don’t have a regular presence here.
Now, who counts as a non-resident?
- If it’s a person, they are considered non-resident if they have stayed in Singapore less than 183 days in a year.
- If it’s a company, they are non-resident if they are not managed or controlled from Singapore.
Also Read: A Step-by-Step Guide to Managing Startup Payroll Services 2025
So even if that overseas party doesn’t have an office or team here, if you’re paying them for certain things, withholding tax might still kick in.
It catches a lot of people off guard, but once you understand who applies it to and when, it gets easier to manage.
Payments Subject to Withholding Tax
Alright, so let’s talk about the types of payments that fall under withholding tax in Singapore for 2025:
Interest on loans or indebtedness: WHT will be 15% if you are paying interest to someone in another country.
Royalties (use of IP, software, trademarks): For using things like software, IP, or trademarks, the WHT rate will be 10%.
Director’s fees to non-residents: If you’re paying a non-resident director, you need to withhold 24%.
Technical and management services performed in Singapore: Say you hire an overseas consultant who works here on-site. Then WHT is 17%.
Professional services by non-resident individuals: Things like freelance work, legal advice, etc. WHT is 15%, or 24%, of net income, depending on how it’s calculated.
Public entertainer fees: If you are paying an overseas performer, it’s 15%.
Distribution from Singapore REITs to foreign corporates: This one is 10%, and that lower rate is extended until 2030.
So, I will say that the most important thing here is to understand what kind of payment you are making and, most importantly, who you are paying it to. This will decide if you need to pay withholding tax and how much it will be.
Key 2025 Updates Businesses Must Note
Now, here are a few key WHD updates you should really be aware of in 2025. some of these might affect how you manage payments to overseas parties:
- Director’s WHT is now 24% (up from 22%). This change ties into Singapore‘s updated personal income tax brackets. So, if you are paying director fees to a non-resident, you will need to account for the higher rate.
- Royalty tax concession for authors and artists is being phased out, starting from YA 2027. So, if you work with creators who used to enjoy a lower tax rate, that is going away soon.
- The 10% REIT WHT concession has been extended till 2030. It is good news if you are a foreign corporate investor. It means continued world tax relief on distribution from Singapore REITs.
- Exemptions for submarine cable IRUs and container leasing have also been extended until 2028 and 2031, respectively. These apply to more niche industries but are worth noting if your business touches logistics or telecom.
- IRAS has stepped up enforcement. WHT is now a major focus area during audits, especially payments made to overseas vendors. So, even small errors can raise red flags.
Compliance Checklist
If you want to stay on the safe side with IRAS when it comes to withholding tax, here is what you need to do:
- First, check if the payment is going to someone outside of Singapore. If it’s a non-resident, WHT rules kick in.
- Next, figure out what kind of payment it is, like, is it a royalty, interest, service fee, director’s fee, or something else? That tells you what rate to apply.
- Then, make sure you’re using the right WHT rate based on that payment type.
- You have to file the WHT return by the 15th of the second month after the payment was made. So, if you paid in January, the return is due by March 15.
- You will do all this through the IRAS MyTax Portal using the S45 e-Service.
- If you are using a tax treaty (DTA) to reduce or remove the WHT, you need to get a Certificate of Residence (COR) from the other country and submit it.
- And finally, don’t forget to keep all your records, agreements, invoices, CORs, everything. If IRAS ever asks, you’ll need to show proof.
Common Mistakes to Avoid
There are a few common mistakes that companies make with WHT, and they can really cost you:
- Assuming that if there is a tax treaty exemption, you don’t have to file. Nope, you still need to file, even if no tax is due.
- Using the wrong WHT rate. For example, applying 10% when it should have been 15%. Easy mistake, but it matters.
- Missing deadlines. Late filing means a 5% penalty right away, +1% per month (up to 15%). That adds up quickly.
- Overlooking that some services are done partly in Singapore. Even if most of the work was overseas, if any part was done here, WHT might apply.
- Thinking dividends attract WHT. They actually don’t, so you don’t need to worry about those.
In 2024, IRAS fined several companies that didn’t file WHT forms, even though no tax was actually payable. Why? Because filing is still mandatory, no matter what.
So, long story short, don’t assume. Always double-check, file properly, and stay on the IRAS good side.
Penalties and How to Fix Errors
If you file your WHT late or make a mistake, here is what can happen:
- You get hit with a 5% penalty right away.
- Then, 1% more for every month it’s late (up to 15%)
- In serious cases, you could face fines of up to $10,000 or even jail time for up to 3 years.
Also Read: 8 Reasons to Consider Payroll Outsourcing in Singapore
But there is some good news:
If you realize there is a mistake and come forward early, IRAS gives you a chance to fix it through its voluntary disclosure program (VDP). If you file the correction within a year, you can usually avoid all those penalties, especially if disclosure is timely and incomplete.
Conclusion
Withholding tax might sound like just another admin task, but honestly, it is a big deal, especially now that Singapore is tightening things up in 2025.
If you really don’t want to get caught off guard, the key is to just know what applies, file things on time, and keep your records neat.
In the end, I’d just say that stay on top of it, don’t leave it to the last minute, and WHT doesn’t have to be a nightmare.
