Determining a Company’s Tax Residency through Certificate of Residence

  • December 01, 2023

Tax residence

Control and Management under Singapore Tax Law

The determination of a company’s tax residency in Singapore hinges on where its business is controlled and managed. This residency status can change from one year to the next.

In a general sense, for a specific Year of Assessment (YA), a company is deemed a tax resident in Singapore if its business’s control and management occurred within Singapore in the previous calendar year. To illustrate, for YA 2023, a company qualifies as a Singapore tax resident if its business’s control and management happened entirely within Singapore in 2022.

Conversely, a company is classified as a non-resident when the control and management of its business doesn’t take place in Singapore.

The term ‘control and management’ refers to decision-making on strategic matters, such as a company’s policy and strategy. The location where a company exercises its control and management is a factual inquiry.

Typically, the determination of control and management hinges on the location of the company’s Board of Directors meetings where pivotal strategic decisions are made. However, solely holding these meetings in Singapore might not suffice under certain circumstances. In such cases, IRAS examines all information presented by the company to ascertain if the business’s control and management indeed occurs in Singapore.

[NEW!] In cases involving the utilization of virtual meeting technology during Board of Directors meetings, the strategic decisions made in Singapore are generally acknowledged if either of these conditions is met:

  • At least 50% of the directors (empowered to make strategic decisions) are physically present in Singapore during the meetings.
  • The Chairman of the Board of Directors (if appointed) is physically present in Singapore during the meeting.

Virtual meeting technology encompasses any tool allowing participation in a meeting without physical presence at the meeting location.

Scenarios where the control and management of a company may not be regarded as occurring in Singapore include:

  • Absence of board of directors meetings in Singapore, with resolutions being passed through circulation.
  • Nominee local directorship with other directors residing outside Singapore.
  • Lack of strategic decision-making by the local director in Singapore.
  • Absence of key employees based in Singapore.

The place where a company is incorporated doesn’t necessarily indicate its tax residency.

Investment Holding Companies Owned by Foreign Entities

Investment holding companies owned by foreign entities, primarily earning passive income or receiving solely foreign-sourced earnings, typically do not qualify as tax residents of Singapore. This is because these entities usually operate under the directives of their foreign companies or shareholders.

Nevertheless, there are circumstances under which they might meet specific criteria to be considered tax residents of Singapore.

A foreign-owned company is one where 50% or more of its shares are held by:

  • Foreign companies incorporated outside Singapore, or
  • Individual shareholders who are not Singaporean citizens.

This ownership criterion is assessed at the highest level of the holding company.

Non-Singapore Incorporated Companies and Foreign Companies’ Singapore Branches

Non-Singapore incorporated companies and the Singapore branches of foreign companies operate under the direction and management of their foreign parent entities. Consequently, they are not typically regarded as tax residents of Singapore.

Yet, there are situations in which they could potentially fulfill specific criteria to be classified as Singapore tax residents.

Companies whose tax residency status might be impacted by travel restrictions related to COVID-19 can find further guidance and information in the document titled “COVID-19 Support Measures and Tax Guidance For Businesses.”

The Impact of Tax Residency on Corporate Income Tax

Although both tax resident and non-resident companies are generally subject to similar taxation, tax resident companies benefit from certain advantages, including:

  • Exemption or reduction of tax liabilities on specific foreign income earned in jurisdictions with Avoidance of Double Taxation Agreements (DTAs) with Singapore.
  • Tax exemption on specified foreign income types like foreign-sourced dividends, profits from foreign branches, and foreign-derived service income under Section 13(8) of the Income Tax Act 1947.
  • Foreign tax credit applicable to taxes paid in foreign jurisdictions, offsetting Singaporean tax obligations on the same income.
  • Tax exemption for newly established startup companies.

Certificate of Residence

The Certificate of Residence (COR) is an official document issued by IRAS to confirm a company’s tax residency status in Singapore. This certification is vital for claiming tax benefits outlined in the Double Taxation Agreements (DTAs) Singapore has established with other jurisdictions. Typically, foreign tax authorities request the COR as evidence of the company’s tax residency in Singapore.

Discover the application process for a COR.

    If your company needs help filing taxes for the year 2023, or requires assistance with Singapore incorporation, economy, banking, etc., feel free to call/WhatsApp us at +65 90612851 or email us at Alternatively, you may leave us a reply using our contact form below.

    Be The First to Know

    Keep in touch to receive the latest listing, news updates and special offers delivered directly to your inbox.

    Recent Blogs

    Contact us to get a Free First Consultation now!

    Contact Us