Withholding tax in Singapore: Rental income

Rental Income Subject to Withholding Tax

Under Section 12(7) (d), rent or other payments under any agreement or arrangement for the use of any movable property shall be deemed derived from Singapore if they are:

  • Borne by a person, resident or a PE in Singapore; OR
  • Deductible against any income accruing in or derived from Singapore.
  • Rental of immovable properties are not covered in Section 12(7) (d).
  • Classed as immovable property. Under the Interpretation Act immovable property includes land, benefits to arise out of land and things attached to the earth or permanently fastened to anything attached to the earth.
  • A payment made to a non-resident for rental of furniture and apartment; withholding tax is usually applicable but by concession IRAS is not prepared to impose withholding tax if the rental of furniture is incidental of the rental of premises.

Withholding tax rate

Tax rates applicable are either:

  • Tax rates under Double Tax Agreement; or
  • Final tax rate of 15% provided such payments:

                                 i.       Are not derived by a non-resident from any trade business, profession or vocation carried out in Singapore; and

                                ii.       Are not effectively connected with any payment establishment of the non-resident in Singapore; or

  • Prevailing corporate tax rate if conditions (i) & (ii) are not fulfilled. (For example payments made to a branch of a foreign company).

Note: In some tax treaties, rental of equipment is covered under royalties.

Concessionary Rate for Charter Fee Payments for the Use of Aircrafts

Time charter fees and voyage charter fees for the charter of aircrafts  
(a) Paid to a resident of a tax treaty country who is an aircraft operator claiming benefits under the "Shipping and Air Transport" Article of the Tax Treaty and where the Article provides for:  
Full exemption of shipping and aircraft products Nil
50% exemption of shipping and aircraft products 1%
A reduced rate Reduced rate or 2% whichever is lowest
(b) Paid to a resident of a tax treaty country who is not an aircraft operator (i.e. the "Shipping and Air Transport" Article of the treaty does not apply) 2%
(c) Paid to a resident of a country which has no tax treaty with Singapore 2%
Bareboat charter fees for the charter of aircraft  
(a) Paid to a resident of a tax treaty country who is an aircraft operator claiming benefits under the "Shipping and Air Transport" Article of the tax treaty and where the Article specifically covers bareboat charter fees and provides for:  
Full exemption of shipping and aircraft products Nil
50% exemption of shipping and aircraft products 1%
A reduced rate Reduced rate or 2% whichever is lowest
(b) Paid to a resident of a tax treaty country who is not an aircraft operator (i.e. the "Shipping and Air Transport" Article of the treaty does not apply) or where the "Shipping and Air Transport" Article does not cover bareboat charter fees 2% (unless it is further reduced by other provision of the tax treaty such as the Royalty Article)
(c) Paid to a resident of a country which has no tax treaty with Singapore 2%

Tax Exemption

 

  1. Time, voyage and bareboat charter fees that have been made exempt from tax from the 17th of February 2012.
  2. Rent or other payments made for the use of movable property (for example cars, hand phones, laptops and other similar items) outside Singapore that is incidental to the overseas business trips made by employees and businesses by concession.
  3. Rental for the use of or the right to use any international telecommunication submarine cable capacity and payments for an IRU. The Exemption applies to payments made from the 28th of February 2003 to the 27th of February 2018.
  4. Time, voyage and bareboat charter fees in respect of Singapore registered ships are exempt.
  5. Payments for leasing of containers. Containers refers to an article of equipment having a minimum volume of one Twenty foot Equivalent Unit (TEU) designed and constructed for repeated use, for the intermodal carriage of goods by road, rail or sea and for the interchange of such forms of transportation by concession.
  6. Approved payments made to a non-resident (excluding any PE in Singapore) by an Approved International Shipping Enterprise; withholding tax exemption.
  7. Payments made to any non-resident person for the use of or the right to use any facility or equipment in a space satellite from the 11th of July 1997 to the 27th of February 2013 is exempt from tax provided the person is not a permanent establishment in Singapore.
  8. With effect from the 28th of February 2013:
  • Payments for satellite capacity will be characterised as payments for services.
  • Withholding tax is not applicable if the payment is made to a non-resident who performs the services outside Singapore.

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