On 2 July 2014, IRAS has updated the content of withholding tax’s FAQ (For payments made to non-resident companies).
IRAS takes the position that withholding tax is applicable on guarantee fee paid by a Singapore payer to a non-resident company. However, guarantee fees paid by a Singapore sub to its overseas parent who act as the guarantor will not be deemed to be sourced in Singapore, and hence withholding tax will not be applicable, provided that the overseas parent
- does not, by itself or in association with others, carry on a business in Singapore or has a permanent establishment in Singapore; or
- carries on a business by itself, or in association with others, in Singapore or has a permanent establishment in Singapore, but the giving of the guarantee is not effectively connected with the business carried on in Singapore or with that permanent establishment.
The non-applicability of Singapore withholding tax is also subject to the conditions that the transactions are conducted at arm’s length and not with intent of siphoning off Singapore income.
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