Recently, one of our clients made an inquiry on his Singapore withholding tax obligations on payments made to a foreign company (F Co) in respect of business coaching services and training run by F Co in Singapore. More specifically, F Co does not have any legal presence in Singapore and it will ask its business coaches to physically provide business coaching services in Singapore to its customer. The relevant tax question is whether the Singapore customer is required to comply with the Singapore withholding tax provisions on the payment for business coaching to F Co.
Under Singapore tax law, where a payment is made to a non-resident company for training, consultancy or other services, Singapore withholding tax is applicable on the gross service fees attributable to work done in Singapore. The amount of tax to be withheld is based on the prevailing corporate tax rate (17%) on the gross service fees.
In the above case, where it is determined that the business coaching services are rendered by F Co in Singapore, the Singapore customer is liable to deduct withholding tax at 17% on the gross service fee. Otherwise, the Singapore customer would be liable to a penalty imposed by IRAS in respect of non-compliance with the Singapore withholding tax provision.
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