Extend and rationalise the withholding tax (“WHT”) exemptions for the financial sector

  • To support Singapore’s value proposition and competitiveness of our financial sector, the following changes will be made:
    • The existing WHT remission for interbank / interbranch transactions will be legislated as a WHT exemption with effect from 1 April 2021, along with a review date of 31 December 2031. Under this WHT exemption, all Section 12(6) payments made by banks in Singapore for the purpose of their trade or business, to their branches / head offices outside Singapore or other banks outside Singapore will be exempt from tax where such payments:
      • are made during the period from 1 April 2021 to 31 December 2031 (both dates inclusive) under a contract that takes effect before 1 April 2021; or
      • are made under a contract that takes effect during the period from 1 April 2021 to 31 December 2031 (both dates inclusive). In such cases, the WHT exemption will apply to the entire duration of the contract, including payments that are made beyond 31 December 2031 under that contract.
  • The WHT exemption will be extended till 31 December 2026. All other conditions of the WHT exemption remain the same. All Section 12(6) payments made to any non-resident person (excluding any PEs in Singapore) by the specified entities, for the purpose of the specified entities’ trade or business, are exempt from tax where such payments:
    • are made during the period from 1 April 2011 to 31 December 2026 (both dates inclusive) under a contract that took effect before 1 April 2011; or
    • are made under a contract that takes effect during the period from 1 April 2011 to 31 December 2026 (both dates inclusive). In such cases, the WHT exemption applies to the entire duration of the contract, including payments that are made beyond 31 December 2026 under that contract.
  • The WHT exemption will be extended till 31 December 2026. All other conditions of the WHT exemption remain the same. Specified entities are not required to withhold tax on all Section 12(6) payments made to any PE in Singapore if the payments:
    • a) are made during the period from 17 February 2012 to 31 December 2026 (both dates inclusive) under a contract that took effect before 17 February 2012; or
    • are made under a contract that takes effect during the period from 17 February 2012 to 31 December 2026 (both dates inclusive). In such cases, the specified entities do not need to withhold tax on all Section 12(6) payments that are made for the entire duration of the contract, including payments that are made beyond 31 December 2026 under that contract.
  • As per the existing tax treatment, the PEs in Singapore are required to declare the Section 12(6) payments that they received in their annual income tax returns and are assessed to tax on such payments (unless the payments are specifically exempt from tax).
  • MAS will release further details of all changes by 31 May 2021.

Extend the WHT exemption on payments made for structured products

  • To support Singapore’s value proposition and competitiveness of our financial sector, the WHT exemption will be extended for another five years and will cover payments made under a contract that takes effect during the period from 1 January 2007 to 31 December 2026 (both dates inclusive).
  • All other conditions of the WHT exemption remain the same.
  • MAS will release further details of the changes by 31 May 2021.

Extend the WHT exemption on payments for over-the-counter (“OTC”) financial derivatives

  • To support Singapore’s value proposition and competitiveness of our financial sector, the WHT exemption on payments for over-the-counter (OTC) financial derivatives will be extended for another five years till 31 December 2026.
  • All other conditions of the WHT exemption remain the same.
  • Under this WHT exemption, all payments on OTC financial derivatives made by a financial institution in Singapore to any non-resident person (excluding any PE in Singapore) are exempt from WHT, where such payments:
    • are made during the period from 20 May 2007 to 31 December 2026 (both dates inclusive) under a contract that took effect before 15 February 2007; or
    • are made under a contract that takes effect during the period from 15 February 2007 to 31 December 2026 (both dates inclusive). In such cases, the WHT exemption applies to the entire duration of the OTC financial derivatives contract, including payments that are made beyond 31 December 2026 under that contract. 
  • MAS will release further details of the changes by 31 May 2021.

Source: IRAS, 17 February 2021