University of Portsmouth: Singapore Taxation Report

This report provides a comprehensive overview of Singapore's taxation policies, focusing on the Income Tax Act, particularly Section 45 concerning withholding tax for payments to non-residents. It explains the tax treatments of various income types, including commission, interest, and royalty. The report details the consequences of non-compliance, outlining penalties for failing to notify the Inland Revenue Authority of Singapore (IRAS) of tax withheld, failing to withhold tax, and late tax payments. It also covers exemptions from withholding tax, such as payments for international submarine capacity, specified software, and satellite capacity. A case study of Delta Ltd illustrates the application of withholding tax to payments made to a non-resident chef. The report concludes by summarizing the key aspects of Singapore's taxation system and its implications for individuals and businesses. It also references relevant sections of the Singapore Income Tax Act and provides a list of sources used in the analysis.

Running head: Taxation
Taxation
Name of the Student
Name of the University
Author Note

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Financial Accounting Assignment
Executive Summary
The report shows about the taxation policy of Singapore Income Tax Act as how the
individual have to deduct the withholding tax and how to submit the same to the authority. It
also shows about the exemption which the individual is able to have and what are the penalty
which will be imposed upon the individual for not following the provision. Lastly it show the
case of Delta Ltd as how the company have to deduct the withholding tax limit from the
payment made to chef who is a non-resident.

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Financial Accounting Assignment
Table of Contents
Introduction................................................................................................................................3
Section 45 of Singapore Income Tax Act..................................................................................3
Tax Treatment in regards of different items..............................................................................4
Consequences of Defaulting withholding Tax Payment............................................................5
Exemptions for withholding tax.................................................................................................6
Case Study of Delta Ltd.............................................................................................................7
Conclusion..................................................................................................................................7
Reference....................................................................................................................................8

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Financial Accounting Assignment
Introduction
. Each country government is able to make the development in the country by taking
tax from the individual and also the corporate industry. The tax is been charged upon the
income which is earned by the individual. It is having many different slab and if the
individual fall under any slab than it have to pay the amount as per the limit of tax to the
government (Agarwal & Qian 2014). This report is showing about the taxation policy in
Singapore Income Tax Act. It shows how an individual have to deal with the tax
consequences in Singapore Taxation. The report show about S45 as who the individual have
to deduct the tax holding limit form the payment which is been done to a non-resident of the
company. It also emphasis upon the consequences of non-payment of the tax and what are
the penalty which will be imposed by the government upon the individual for not following
the rules and norms as per Singapore Income Tax Act (Araki & Claus 2014). It also describe
about the case of Delta Ltd as whether it should deduct the tax withholding from the payment
which is been made to the Chef.
Section 45 of Singapore Income Tax Act
As per Section 45 is been consider it deals with the withholding tax payment which is
done to non-resident and partnership firm. It show about the percentage and other details
which the individual have to see while doing different kind of payment to a non-resident or
partnership which is having only non-resident partner (Brauner & Baez Moreno 2015). The
payment is been consider are royalty or interest which the individual have to pay to non-
resident. The amount which is been deducted by the individual as withholding tax should be
paid to Inland Revenue Authority of Singapore.
As per partnership is been concern if an individual is doing any payment to an non-
resident partnership firm than it have to deduct also the withholding tax payment in related to

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Financial Accounting Assignment
the payment which is been done to the partners of partnership firm (Caruana-Galizia &
Caruana-Galizia 2016). The withholding tax which is been taken by the individual should be
submitted to Inland Revenue Authority of Singapore.
There is always an flexibility in regards of the tax limit as it will be very harsh if the
partnership have to pay the withholding tax so to give them relief in regards of the limit, the
law came up with a provision that if the partnership firm is having one resident partner than
they do not have to pay the withholding tax so if the individual if paying some amount of
payment to partnership firm which is having an resident partner than it does not have to
deduct any amount as withholding tax from the payment amount of partnership (Fleming et al
2016).
As per the provision in Section 45 if there is some kind of changes in the partnership
in regards of the residency status of partner than it have to report the same to Authority so
that it can able to do the changes in the paper which is useful in many ways to the Authority
in future.
Tax Treatment in regards of different items
1. Commission and Interest - The payment which are made related to interest and
commission which are been incur upon the loan taken in Singapore which is related to
the resident of Singapore or if the individual is having an permanent place in
Singapore this is been stated in “Section 12(6) in Singapore Income Tax Act”. This
provision also include the income which the individual is able to generate from the
use of the loan and the income is been utilized in Singapore (Iras.gov.sg. 2019).
2. Royalty – This provision show the payment which the individual have to do in
regards of the royalty payment which is directly related to the use of movable
property which is situated in Singapore , this apply only when the individual is having

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Financial Accounting Assignment
any permanent place or it is an resident of Singapore the provision is from “Section
12(7)(a) in Singapore Income Tax Act” (Iras.gov.sg. 2019).
3. Payment made for the use of scientific or commercial information or knowledge
– This show about the amount of money which is been done in related to use of
scientific, commercial knowledge, technical or any other information that is there in
Singapore only when the individual is having any permanent property or is a resident
of Singapore this provision been is given in “Section 12(7)(b) in Singapore Income
Tax Act” (Iras.gov.sg. 2019).
Table No – 1
Source – Author
Consequences of Defaulting withholding Tax Payment
It is been found that the individual is not able to deduct or submit the withholding tax
to the authority so the penalties which will be imposed are shown below:
1. Penalties for failure to notify IRAS of tax withheld - As per the provision of
withholding tax it is the duty to of the individual to deposit the same which is been

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Financial Accounting Assignment
deducted by the individual to authority as per IR37 so if the individual fail to do so
than it have to pay the penalty amount which is 3 times the amount deducted but it
should not be more than $10000 or it have to go to imprisonment for 3 years or it can
have both as per the authority decision (Johannesen & Zucman 2014).
2. Penalties for failure of withhold tax – As per section 89 an individual should pay
the amount which it have deducted as per “Section 45(1) of Singapore Income Tax
Act” so it is the duty of the individual to pay the withholding tax amount to the
authority (Markle 2016). So if the individual due to circumstance is not able to deduct
the withholding tax from the payment to an non-resident than it have to bear the same
from his own pocket but it have to pay the amount to the authority as the authority
will recover the same as “Section of 45(1)”
3. Penalties for late payment of tax withheld – This provision deal with the late
payment as it can happen that the individual forgot to pay the amount on time than it
have to pay the penalty so the percentage which will be charged is 20% of
withholding tax limit (Saad 2014). It does not have to pay all in one as it have to pay 5
% on starting than it will able to pay 1% in every month and it will go to maximum
15%. So if the individual is not able to pay tax in time than it has to pay the above
mention penalty.
Exemptions for withholding tax
As per the provision there are many items which are not included in the limit of withholding
tax and all the exemption is been listed below:
1. Payment for use International Submarine Capacity – The provision exempted
15% of withholding tax limit in regards of the payment of the amount in related to
international submarine capacity (Wiedemann & Finke 2015).

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Financial Accounting Assignment
2. Specified Software Payments - As per the payment in regards of Specified Software
Payment is been consider an individual get an exemption of 15% upon the
withholding tax limit.
3. Payment for Satellite Capacity – As per the payment which is been done by the
individual in regards of the Satellite Capacity to a non-resident related to payment of
leasing capacity of space than it will get an exemption of 15% upon the withholding
tax limit
Case Study of Delta Ltd
The Section 45 of SITA say that if any payment is been made to a Non-Resident in
regards of royalty or interest than the individual have to deduct the withholding tax amount
from the payment and have to submit the same to respective authority.
In the case study which is been given about that Delta Enterprise is having an non-
resident chef so if the company is paying them the above nature payment than it should
deduct the withholding tax as per “Section 89 of Singapore Income Tax Act” and submit
the same to the authority.
Conclusion
On a conclusive note, it can be said the taxation policy help the government in doing
the development of country so the tax is been charged upon the income which is been earned
by the individual and corporate sector. It shows about the Section 45 of Singapore Income
Tax Act and show how the individual have to follow the provision and how it have to
implement it in the business. Lastly it conclude about the exemption which the individual
have upon the deduction and also the penalty which is been imposed if the individual is not
able to have proper implication of the provision so it have shown the required penalty and
also show about the case of Delta Ltd as whether it should deduct the tax withholding or not.

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Financial Accounting Assignment
Reference
Agarwal, S., & Qian, W. (2014). Consumption and debt response to unanticipated income
shocks: Evidence from a natural experiment in singapore. American Economic
Review, 104(12), 4205-30.
Araki, S., & Claus, I. (2014). A comparative analysis on tax administration in Asia and the
Pacific. Asian Development Bank.
Brauner, Y., & Baez Moreno, A. (2015). Withholding taxes in the service of BEPS action 1:
address the tax challenges of the digital economy. WU International Taxation
Research Paper Series, (2015-14).
Caruana-Galizia, P., & Caruana-Galizia, M. (2016). Offshore financial activity and tax
policy: evidence from a leaked data set. Journal of Public Policy, 36(3), 457-488.
Fleming Jr, J. C., Peroni, R. J., & Shay, S. E. (2014). Formulary Apportionment in the US
International Income Tax System: Putting Lipstick on a Pig. Mich. J. Int'l L., 36, 1.
Iras.gov.sg. (2019). S45 Withholding Tax and Partnerships - IRAS. Retrieved from
https://www.iras.gov.sg/irashome/Businesses/Self-Employed/Working-out-your-
taxes/S45-Withholding-Tax-and-Partnerships/
Iras.gov.sg. (2019). S45 Withholding Tax and Partnerships - IRAS. Retrieved from
https://www.iras.gov.sg/irashome/Businesses/Self-Employed/Working-out-your-
taxes/S45-Withholding-Tax-and-Partnerships/
Iras.gov.sg. (2019). Withholding Tax - IRAS. Retrieved from
https://www.iras.gov.sg/irashome/e-Services/Other-Taxes/Withholding-Tax/
Johannesen, N., & Zucman, G. (2014). The end of bank secrecy? An evaluation of the G20
tax haven crackdown. American Economic Journal: Economic Policy, 6(1), 65-91.

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Markle, K. (2016). A comparison of the tax‐motivated income shifting of multinationals in
territorial and worldwide countries. Contemporary Accounting Research, 33(1), 7-43.
Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, 1069-1075.
Wiedemann, V., & Finke, K. (2015). Taxing investments in the Asia-Pacific region: The
importance of cross-border taxation and tax incentives (No. 15-014). ZEW
Discussion Papers.