Singapore Corporate Tax Residency

Singapore has one of the lowest corporate tax rates in the world, supplemented by numerous tax schemes and incentives by the government to help companies grow their business. Additionally, Singapore also has a wide tax treaty network— thereby making it a most attractive and conducive place for foreign investment in this region.

What is COR?

A COR is a letter certifying that the company is a tax resident in Singapore for the purpose of claiming benefits under the Avoidance of Double Taxation Agreement (DTA). A company is a tax resident in Singapore if the control and management of its business is exercised in Singapore. A Singapore tax resident company can enjoy the benefits in the DTAs that Singapore has concluded with other treaty countries.

Abuse of COR

Unfortunately, some entities abuse such tax treaty benefits, resulting in the Inland Revenue Authority of Singapore (IRAS) being more stringent in granting a tax residence status (for purposes of enjoying benefits conferred under the Avoidance of Double Taxation Agreements between Singapore and the treaty countries) to companies.

Tax residence status of a company

Under the Income Tax Act of Singapore, the tax residence status of a company is determined by the place where its control and management is exercised.

The meaning of this “control and management” is derived from common law principles— being the directing authority that controls the affairs of a company, usually the strategic management and decision-making body (the Board of Directors who make the fundamental policies of the company’s business).

Such distinguishing factors of this control and management include the body’s power and ability to raise finance; to approve accounts; to appoint those who manage the company’s day-to-day operations; to declare a dividend; to decide on matters relating to a merger/acquisition/joint venture; and has control of the company’s bank accounts.

To be regarded as tax resident in Singapore, it is therefore advisable to have as many of its Board meetings in Singapore, showing that key decisions by the controlling and managing authority of the company are made in Singapore— this is not at all a problem because, being an aviation hub for the Asia-Pacific region, Singapore is well-placed logistically to be a convenient venue for such board meetings.

To further support the company’s case of being tax resident in Singapore, where the directors live, and the physical location of the books and records of the company are also important. Hence, where a company conducts its trading activities or physical operations is not necessarily where it is tax resident.

Certificate of Residence

The proof of being a Singapore tax resident (in the form of a certification from IRAS called the Certificate of Residence) to be furnished to the home/treaty country’s authorities may thus be difficult to obtain from IRAS if the requisite requirements are not fulfilled. For instance, an investment holding company owned by a non-Singapore entity having passive sources of income or receiving only foreign-sourced income may have difficulties getting this certification from IRAS and have to justify its reasons for setting up operations in Singapore or that its control and management is indeed in Singapore (as per the above).

When preparing your annual income tax return in Singapore, all the above factors and other ancillary issues have to be taken into consideration in declaring how and where the control and management of the company is exercised, and a Singapore tax resident company may hold that status for one year but not in the next. Thus, companies have to provide concrete evidence to show that the control and management was indeed in Singapore for the relevant year, in order for the tax resident status to hold valid.

Who can apply for Certificate of Residence

• You can apply only if your company is a tax resident in Singapore. The application is for back Years of Assessment (YA), the current YA or the next YA.
• The income is remitted or going to be remitted into Singapore.
• This is not applicable to:
  1. A nominee company as it is not the beneficial owner of the income derived from the treaty country. A nominee company is a company that is formed for the purpose of holding shares on behalf of the beneficial owners of the shares.
  2. A foreign-owned* company which is an investment-holding company with purely passive sources of income or receiving only foreign-sourced income.

     However, COR may be issued provided that such a company can furnish the reasons for setting up an office in Singapore and provide evidence to substantiate that its control and management is in Singapore. In particular, IRAS considers the following factors:

     1. Board of directors’ meetings are held in Singapore even if decisions made pertain only to routine matters since the company is an investment holding company, and
        1. Presence of other related companies (tax resident or with business activities) in Singapore; or
        2. Receives support or administrative services from a related company in Singapore; or
        3. Have at least 1 director based in Singapore who holds an executive position and is not a nominee director; or
        4. Have at least 1 key employee (e.g. CEO, CFO, COO) based in Singapore.
  3. A non-Singapore incorporated company or the Singapore branch of a non-Singapore incorporated company since the control and management of the Singapore branch is vested with the overseas parent company. COR may be issued if IRAS is satisfied that the control and management of the company is indeed exercised in Singapore and there are valid reasons as to why the company is not incorporated in Singapore.
• IRAS reserves the right to request for additional information on the company.

* a foreign-owned company refers to a company where 50% or more of its shares are held by foreign companies/shareholders.

COR Application Process

InCorp can assist in your COR Application. The processing time is about 7-14 working days.

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