Singapore contractor tax on Facebook, Google ads and software copyright purchases: Yes or no?

Singapore Contractor Tax_ a tax levied on income received by non-Singapore resident individuals/companies from conducting business or providing services within Singapore.

However, not all services provided by non-resident individuals/companies in Singapore to Singaporean individuals/companies are subject to withholding tax. In fact, the Singapore government always improves and creates favorable conditions for non-resident individuals/companies in Singapore to save costs as well as enhance Singapore's international position.

Therefore, the question that many people are interested in today is "So for the cost of advertising services on the Internet (for Facebook and Google) and software copyrights (Apps, games on Android, IOS store) provided by individuals/companies not residing in Singapore (in the case of Vietnam), are they subject to contractor tax or not?"

GLA's Singapore tax and accounting experts will clearly and easily answer the above questions of Enterprises through the following article.

1. Preliminary concept of Contractor Tax in Singapore

Contractor Tax – A tax levied on income received by a NON-Singapore resident individual/company from a Singapore resident individual/company.

Individuals/companies NOT residing in Singapore will be subject to withholding tax if they fall under the following conditions:

• Income originating from Singapore (Singaporean source).
• Income received from services or work performed in Singapore.
• Some other special types of income.

2. Concept of companies/individuals NOT tax residents in Singapore

Below is a brief overview of the types of NON-Singapore resident personal/corporate income that may be subject to withholding tax:

• Profits, commissions and debt related fees: 15%.
• Intellectual property copyright fee: 10%.
• Management fee (according to current corporate tax rate).
• Forms of service provision (according to current corporate tax rates).
• Rent: 15%.

4. Services will not be subject to contractor tax

• Dividends to owners (foreigners) of companies in Singapore

Foreign owners of a Singapore company can remit dividends to their country of residence without being subject to withholding tax.

• Payments from the leasing of vessels

Announced in Budget 2012, payments to non-Singapore residents made on or after 17 February 02 will be exempt from withholding tax to reduce costs for ship charterers to turn Singapore into an international maritime hub. 

• Payment to Singapore branch of non-Singapore resident company

As announced in Budget 2014, in order to reduce the expenses for branches of non-resident companies in Singapore, payments including interest, commission, royalties or management fees to branches will be exempted from withholding tax. 

• Other payments exempt from contractor tax:

1. Payment for satellite
2. Payment for submarine cable usage
3. Payment for services rendered outside Singapore 

5. Are advertising services on Facebook and Google subject to contractor tax in Singapore?

After clarifying the regulations on contractor tax in Singapore, here is the answer to the question "Are advertising services on Facebook and Google subject to contractor tax in Singapore?"

5.1. Google and Facebook advertising service costs

In fact, this is a form of service provision as mentioned in the section "Contractor tax collection services" so Google and Facebook advertising services may be subject to contractor tax.

Normally, when a Singapore company pays for advertising to Google, it is paying to Google Asia Pacific Pte. Ltd. - This is a domestic Singapore company so it will not be subject to contractor tax. 

Illustration of electronic invoice payment to Google

Paying for advertising to Facebook means paying for Facebook Ireland - This is a non-resident company in Singapore so it will be subject to withholding tax although it is difficult to prove whether this service takes place in or outside Singapore. In addition, if the business pays Facebook via master card, it will be difficult to retain a portion of the payment to Facebook. 

Illustration of electronic invoice payment to Google 

5.2. Software copyright transfer service for Singapore companies

Service charges may or may not be subject to contractor tax depending on the following circumstances:

Transfer of complete ownership of the software (The complete alienation of copyright rights in software) is not subject to withholding tax - the buyer has the right to download the software from the server or copy it using external storage devices from the supplier and has complete legal and economic ownership worldwide or in a specified geographical area. 

In that case, revenue from software is considered as income for calculating personal/corporate income tax and contractor tax does not apply in this case.

For example: A Singaporean company buys full ownership of software from a foreign game development unit, this game product is only in the development and testing phase and is not legally and economically owned by any other unit or if it is, the ownership unit does not overlap with the geographical scope of the Singaporean company. Then the Singaporean company will upload it to the Android store or IOS store to receive revenue from Google and Apple and take full legal responsibility for the software. 

Transfer of software usage/exploitation rights (the use of software) is subject to withholding tax - the buyer is allowed to use/copy/exploit for commercial purposes based on the software will be subject to withholding tax (exploitation rights include modifying the software, as well as preparing other derivative products for the software).

For example, a Singapore company providing website design services purchases a website template from a template developer in the US to edit, redesign, and sell to customers. In addition, all legal responsibilities and economic ownership of the template still belong to the template developer in the US.  

For more details, businesses can read more updated information from IRAS. click here

6. How will GLA support businesses in complying with contractor tax laws and optimizing taxes for the company?

With 10 years of experience supporting hundreds of businesses to optimize taxes for the company, the company's Singapore tax and accounting experts will support businesses:

• Accurate and legal tax and accounting consulting, answering company questions.
• Support companies to operate effectively with Singapore tax and accounting services at optimal cost, all-inclusive, no hidden costs, and in accordance with the law.
• Work with Singapore government agencies when the company needs to clarify and resolve operational and compliance issues effectively.
• Solving difficult problems in operating multinational companies.

7. Frequently asked questions about contractor tax collection with Facebook and Google advertising services

Highlights

• Withholding tax applies to non-Singapore resident individuals/companies that receive income from sources in Singapore.
• Certain payments such as royalties, management fees and rents may be subject to withholding tax.
• Many payments are exempt from withholding tax to encourage investment and economic development in Singapore.
• GLA will support companies to optimize taxes effectively, accurately and legally.