All You Need to Know About the Corporate Tax Residency in Singapore

In Singapore, a company is either a tax resident or non-tax resident. Such status is determined by where the company is controlled and managed. However, the tax residency of a company may change from year to year. If you are incorporating your company in Singapore and need some information on the corporate tax residency in the country, you should keep reading this article.

How is a company’s tax residency determined in Singapore?

As mentioned above, the tax residence status of a company in Singapore is determined by the place where its control and management are carried out. Therefore, in general, a company will be considered a Singapore taxpayer for a given Year of Assessment (YA) if the control and management of its business were conducted in Singapore in the previous calendar year. For example, a company will be a Singapore tax resident for YA 2022 if the control and management of its business are exercised in the country for the whole of 2021.

The control and management are generally defined as the location where the company’s Board of Directors meetings are held, and decisions on strategic matters are made. However, please note that the place of incorporation of a company is not necessarily indicative of the tax residence of a company.

Conversely, a company is a non-resident when the control and management of the company are not exercised in Singapore. To be more specific, the following are some scenarios where business control and management are deemed not to be carried out in Singapore:

• No directors’ meetings are held in Singapore. Instead, the director’s resolution is only circulated;
• Local directors are nominee directors, while other directors are based outside Singapore;
• No strategic decisions are made by local directors in Singapore; and
• No key employees are based in Singapore.

Which companies are considered non-tax residents in Singapore?

There are certain types of companies that are automatically considered non-tax residents in Singapore:

Foreign-Owned Investment Holding Companies

Foreign-owned investment holding companies with pure passive income sources or only receiving income sourced from abroad are generally considered non-residents because these companies usually act on the orders of their foreign companies/shareholders. However, they may still be treated as Singapore tax residents if they can satisfy IRAS’ requirements. For additional information about the requirements, click here.

Non-Singapore Incorporated Companies and Singapore Branches of Foreign Companies

Non-Singapore incorporated companies and Singapore branches of foreign companies are controlled and managed by their foreign parents. Therefore, they are regarded as non-residents. However, they may still be treated as Singapore tax residents if they can meet certain conditions. 

What is the impact of tax residency on foreign income?

Resident and non-resident companies are generally taxed in the same manner. However, tax resident companies can enjoy certain benefits that relate to income from foreign sources, include:

• Tax benefits granted under the Singapore Double Taxation Avoidance Agreements (DTAs) have been covered by other jurisdictions;
• Tax exemption on dividends originating from abroad, foreign branch profits, and service income originating from abroad based on Article 13(8) of the Income Tax Act; and
• Tax exemption for new companies.

What is a Certificate of Residence (COR)?

Singapore tax residents that derive income from other countries may apply to IRAS for a Certificate of Residence (COR). It is a letter certifying that a company is a taxpayer in Singapore for the purpose of claiming benefits under the DTAs or Limited Treaties. Jurisdictions that conclude DTAs or Limited Treaties with Singapore are referred to as “treaty partners.”

Under the DTAs, treaty partners may provide tax breaks (e.g., tax exemptions and lower withholding rates) to Singapore residents on income earned from their jurisdiction. These are benefits that non-residents cannot enjoy.

For DTAs with Limitation of Relief provisions, Singapore tax resident companies must meet additional requirements to claim treaty benefits. For example, they must remit to Singapore income sourced from abroad, which is taxed in Singapore on a remittance basis.

Suppose you are not claiming benefits under a DTA or Limited Treaty but wish to obtain a letter certifying that your company is a Singapore tax resident. In that case, you can write to IRAS on company letterhead with the following information:

• Name and Unique Entity Number (UEN) of the company;
• Reason(s) for requesting the letter of residence;
• Confirmation that the control and management of the company is exercised in Singapore; and
• A calendar year for which the letter is required.

How do I apply for a COR?

Your company is eligible for a COR as long as it is a tax resident. To apply for a COR, your company will need to engage an authorized corporate service agent as suggested by IRAS. They will log in and apply for COR on behalf of your company.

After that, IRAS will process your application within seven working days. Next, a digital copy of the approved COR will be made available in myTax Portal. You will also have the option to print or download the approved COR.

Particular Circumstances for Applying for a COR in Writing

You may apply for a COR in writing if your company is:

• a sole-proprietorship business owned by the company;
• a partnership business of which the company is a partner; or
• a non-Singapore incorporate companies.

IRAS will process your application within 14 working days from the day they receive the complete information. The processing time may take longer if the case is complex. 

Common misconceptions regarding the corporate tax residency in Singapore

Below are some most common misconceptions that people make when it comes to corporate tax residency in Singapore.

• Only tax resident companies are entitled to tax exemptions and rebates.

All companies (residents and non-residents) in Singapore can enjoy the partial tax exemption scheme. From YA 2020 onwards, the tax exemptions are as follows:

• 75% exemption on the first S$10,000 of chargeable income; and
• A further 50% exemption on the next S$190,000 of chargeable income

Aside from the partial tax exemption, all companies are also entitled to a corporate income tax rebate of 25% capped at S$15,000 for YA 2020.

• All non-resident companies are exempted from paying taxes in Singapore.

Singapore operates on a territorial taxation basis. This means that a non-tax resident company must pay tax in Singapore on income obtained in or originating from Singapore; or accepted in Singapore from outside Singapore.

For Singapore tax purposes, taxable income refers to: 

• Profits or gains from any trade or business;
• Income from investments such as dividends, interest, and rent;
• Royalties, premiums, and other benefits of property; and
• Other income benefits.

• Non-resident companies are taxed at a different tax rate other than 17%.

As of YA 2010, a company is subject to a 17% tax on its taxable income regardless of whether it is a resident or non-resident company.

• All Singapore-incorporated companies are tax resident companies.

As we have already mentioned, the country of incorporation does not always indicate the tax domicile of a company. A company is considered a Singapore tax resident for a particular YA if the control and management of its business were conducted in Singapore in the previous calendar year. Therefore, if the control and management of the company are not carried out in Singapore, then the company is considered a non-resident for the YA.

Need help with your COR application?

We are professionals in Singapore’s corporate laws and regulations. Our reliable guides and high success rate come with more than ten years of experience. Therefore, If you need more information about tax residency in Singapore or help with a COR application, please contact us, and our team of experts will be happy to assist you!

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