Permanent Establishment in Singapore: Withholding tax & technical assistance fees

Section 2(1) of the Singapore Income Tax Act (SITA) defines a PE to mean a fixed place where a business is wholly or partly carried out including a place of management, a branch, an office, a factory, a warehouse, a workshop, a farm or plantation, a mine, oil well, quarry or other place of extraction of natural resources, a building or work site or a construction, installation or assembly project.

Withholding tax

Section 45 of SITA requires tax to be withheld when the following payments are made to non-residents:


Nature of Income Tax rates
Interest, commissions, fees or any other payments relating to loans or indebtedness: 15%
Royalty or other lump sum payments for the use of moveable property: 10%
Payment for the use of or the right to use scientific, technical, industrial or commercial knowledge or information: 10%
Rent or other payments for the use of moveable properties: 15%
Technical assistance and service fees: Prevailing tax rate(1)
Fees for the management of any trade, business or profession: Prevailing tax rate(1)

(1)  The prevailing corporate tax rate is currently 17% whilst the rate for individuals is 20% increasing to 22% in YA 2017.

The above rates can be reduced by the Double Tax Agreements (DTA) if any signed between the recipient’s country of residence and Singapore. As a PE is non-resident in Singapore the above withholding tax would apply.

Technical Assistance fees

For technical assistance and service fees, IRAS has clarified that there is no withholding tax on the part of the payment that relates to reimbursement of the hotel accommodation, transportation expenses and meals. However a detailed breakdown of the expenses must be obtained and provided the amount charged is without any mark-up or profit element.

Where the DTA has a business profit clause technical fees will be taxed under the business profit clause.

An example of such a clause can be found in Article 7 of the DTA between Singapore and Cyprus which is elaborated below.

Article 7: Business Profits

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed as deductions all expenses including executive and general administrative expenses, which would be deductible if the permanent establishment were an independent enterprise, insofar as they are reasonably allocable to the permanent establishment, whether incurred in the Contracting State in which the permanent establishment is situated or elsewhere.’

Thus where there is no business profits clause in the DTA or where there is no DTA signed, technical fees will be taxed gross at the prevailing tax rate with exemptions for reimbursed costs.

It would be more advantageous in such situations to have a PE as a PE is taxed based on the PE’s attributable profits and specific deductions are allowed e.g. ‘Executive and general administrative expenses’ and the partial exemption for the first S$300,000 of adjusted profit is available for PEs before arriving at the tax charge.


A foreign enterprise conducting business in Singapore has to be aware of its exposure to being a PE in Singapore. The definition and taxablility of PEs are also covered by DTAs. For technical services rendered in Singapore by a non-resident company the presence of a business profit clause brings such income to tax where the enterprise carries out business in Singapore through a PE.


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