The Inland Revenue Authority of Singapore on 23rd February 2001 published guidelines on how existing Singapore income tax laws and regulations apply to payment of software royalties. Such guidelines are welcomed by the industry as they go some way in making clear a very murky area of tax.Whenever a person purchases software, whether online, in a box or otherwise, the payment he makes is considered by the IRAS to be royalty payments. Traditionally, royalty payments when made to a non-resident is subject to withholding tax, that is the buyer had to withhold a portion of the payment to pay to IRAS. If the buyer fails to do this, there are penalties imposed.
The "standard tax rate" is 15%. Where the non-resident is from a country that has a tax treaty with Singapore, the rate will that in the tax treaty.
This not only makes it inconvenient for end-user/buyers but there was confusion as to when withholding tax is payable.
Categories of Exemption
On 11 November 2000, the government announced that as from 1 January 2001, shrink-wrap software was exempted from withholding tax. On 23 February 2001, this exemption was extended to other categories. At present, 4 categories of software are exempted:-
- shrink-wrap software
- downloadable software for end-user
- site licences; and
- software bundled with computer hardware.
May 17, 2008 - 09:45 AM
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