The tax laws of Singapore define tax presence, also known as tax residence, in the country. Every resident company of Singapore is obliged to abide by specific tax regulations. Those which have dealings with foreign entities are usually scrutinized especially closely.

Does The Singapore Company Have Tax Substance Perspective?

Singapore is attractive to businesses and companies which seek a suitable environment for business expansion. The Southeast Asian nation has a relatively well-developed economy. The country’s economy is primarily based on business, trade, finance and manufacturing. These activities account for 75% of the country’s total GDP. This implies that businesses and companies form the largest portion of the country’s income and employment opportunities for its citizens. Another reason why anyone should consider starting a company in Singapore is because of its ease of doing business. Singapore is ranked second in the world for the purposes of conducting business activities. Singapore also has one of the busiest ports in the world as well as one of the most vibrant foreign exchange markets.

Corporate Tax in Singapore

Another advantage which those who start companies in Singapore experience lies in the fact that the country has one of the lowest corporate tax rates globally at 17%. Businesses located across Singapore also have the opportunity to utilize various tax incentives to their advantage. Singapore’s many international tax treaties may also be used by certain companies to reduce their tax burden; however, this must be done in a legal manner. Despite these advantages, before claiming the benefits of this extremely low tax rate, the tax presence of a Singapore company must first be established.

Tax Presence

Tax presence, also known as taxable presence or tax residence, is a matter which is determined by the tax authorities of a specific country. It permits one to understand how a company is to be taxed. Among the most notable criteria used by some countries to determine tax presence include the location in which business activities are conducted, income connected with a particular business or trade, or the location of the business’s permanent establishment.

However, in Singapore, a company’s tax presence is determined by the location from which it is managed and controlled. A company which has tax presence in Singapore is one in which board meetings which directly affect company matters are conducted in Singapore. Companies which are Singapore tax residents are permitted to claim certain benefits which are not available to companies which are not tax residents.

On a related note, if you are having any issues with regard to the corporate tax matters of your company, you can always contact us at Paul Hype Page & Co. Our tax team has much knowledge and experience in dealing with all matters related to corporate tax in Singapore. When you work with us, you can be assured that we will provide you with our best possible services as we work to solve any tax-related problems you might face.

Tax Presence and the Filing of Tax Returns

When a company’s tax returns are filed, the authorities will require that a company with tax presence is fully compliant with the official procedures and standards related to the filing of tax returns. All Singaporean companies are expected to list down all the business activities which they are carrying out. A company that is conducting more than one profitable business is expected to list and declare all its activities as well as the gross profits which they have made from those activities. This will help the country’s taxation authorities to determine the taxable income for that business. It also prevents the problem of the formation of a company which does not actually exist from taking place.

The Inland Revenue Authority of Singapore (IRAS) and other tax authorities also consider other important matters in order to determine a company’s tax presence and how it relates to how the company is to be taxed. Such matters include the location of the company’s physical office, the location both tangible and intangible assets alike, the number of employees working in each branch of the company, and the corporate functions which are performed in each of the company’s branches. The physical location of directors and nominee directors may also be taken into account.

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Tax Presence and Amount of Taxes to Be Paid

One of the reasons why tax presence is important is that some companies abuse tax presence to reduce the amount of tax that they pay. For example, a company which has a head office in a different country but is operating in Singapore with at least 20 employees there will be making money from Singapore but not paying taxes there because its managerial roles are in the other country because it is the location of the head office. In this case a company will evade paying tax despite the fact that it is making money from Singapore. This therefore proves the importance of laws governing tax presence. Therefore, the tax authorities of Singapore must ensure that tax compliance regulations are obeyed by internationally operating companies located in Singapore.

The Base Erosion and Profit Shifting (BEPS) framework developed by the OECD aims to ensure that such abuses of tax laws are rare. There are also regulations in place for the purposes of tax reporting based on business activities. The initiatives contained in the BEPS framework have done much to improve standards of transparency, strengthen taxation laws, and increase the level of partnership between economies. The BEPS framework also covers for incidents which tax treaties between different nations allow to go unmentioned. It rightly places the burden of proof with regard to the abuse of tax laws related to tax presence on companies and has thus positively affected how multinational companies conduct their business operations.

The BEPS framework also does much to assist the maintenance of the company registry of Singapore. This is because if a company is registered in a country but is not operating there, the company will not be recognized as valid. In this way, the Singaporean company registry will be able to ensure that it only contains active companies while also being able to remove all companies which are neither active nor valid from its list.

Suggestions for Non-Resident Companies Located in Singapore

With regard to the information which has been presented in the preceding paragraphs, there are specific procedural steps which must be followed. Among the requirements for non-resident companies in Singapore include the following: the company must have at least one shareholder who is listed in the public registry, only the local agent ought to know of the final beneficiary, at least one director and company secretary must be residents of Singapore, and the records of the company’s financial statements must be adequately kept and submitted.

Once it has been established that the company in question is a genuine and legitimate one, IRAS and other tax authorities of Singapore will treat the company as a non-fraudulent company. This in turn provides a major advantage when filing tax returns. However, some might say that the process is somewhat complicated because it often involves the right to conduct business activities in the territory of another country.

Such activities are closely linked to international tax planning, which is an area which not everyone completely understands. If such is true of you, we at Paul Hype Page & Co will be able to assist you with your own international tax planning. We will see to it that your tax burden is suitably decreased while at the same time ensuring that you are in compliance with the tax laws of all the countries involved.