SINGAPORE Law and Practice Contributed by: Renu Menon, May Ng, Blossom Hing, SC and Ong Ken Loon, Drew & Napier LLC
Interest and Related Payments Subject to Withholding Tax Generally, interest, commissions, fees or other pay- ments in connection with any loan or indebtedness (payments) are (subject to exceptions) deemed to be sourced in Singapore if they are borne, directly or indi- rectly, by a tax resident* of Singapore or a permanent establishment in Singapore. Such payments are sub- ject to withholding tax when made to non-Singapore tax residents. The withholding tax rate for payments that are neither derived from any trade or business carried on in Sin- gapore nor effectively connected with any permanent establishment in Singapore is 15% on the gross pay- ment. Otherwise, such payments would be subject to a non-final tax at 17%, with deductions available. These rates may be reduced under applicable tax treaties. Exemptions are available for payments such as: • payments made to Singapore branches of non- resident companies; • payments made between banks or their branches/ head offices; and • payments made by certain approved financial insti- tutions for the purpose of their trade or business. *An entity is a tax resident of Singapore if the “control and management” of its business is exercised in Sin- gapore. This usually means that strategic decisions of the business are made through the meetings of the company’s board of directors in Singapore. 4.2 Other Taxes, Duties, Charges or Tax Considerations Income Tax Lenders may derive income that is taxable in Sin- gapore. Singapore’s Income Tax Act 1947 subjects income (including income of foreign entities operating in Singapore) to tax if it is either (i) sourced in Singa- pore or (ii) remitted into Singapore from outside Sin- gapore. Under (i), income would generally be sourced in Sin- gapore if the income-producing activities took place in Singapore.
Under (ii), income may be deemed remitted into Sin- gapore if it is used to satisfy any debt incurred in respect of a trade or business carried on in Singapore or used to purchase any movable property brought
into Singapore. Stamp Duties
Stamp duties are payable on dutiable documents relating to immovable properties in Singapore or stocks or shares of Singapore companies. Generally, loan agreements or security documents that create security over immovable property in Singa- pore or stocks or shares of Singapore companies are dutiable documents, and would be subject to stamp duties (capped at SGD500) at the following rates on the loan amount. • Mortgage other than an equitable mortgage: 0.4%. • Equitable mortgage: 0.2%. Dutiable documents must be stamped: • if executed in Singapore, within 14 days after the date the document is executed; or • if executed outside Singapore and subsequently brought into Singapore, within 30 days after it is received in Singapore. 4.3 Foreign Lenders or Non-Money Centre Bank Lenders As an international financial centre, Singapore is an attractive location to carry out cross-border financing transactions. Foreign lenders benefit from Singapore’s wide tax treaty network with over 90 countries which caps withholding tax at lower than statutory rates in many cases. The domestic tax system has well-devel- oped rules and administrative guidance surrounding financing transactions and advance rulings are avail- able to give taxpayers additional tax certainty.
5. Guarantees and Security 5.1 Assets and Forms of Security
All classes of collateral may potentially be available to secure lending obligations, provided the grant thereof
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