Singapore is one of the world’s most desirable countries for attracting foreign investments and companies from abroad. A major reason for this phenomenon is Singapore’s corporate income tax rates, which only tax profits at the corporate level and are among the world’s lowest. The Inland Revenue Authority of Singapore (IRAS) has set up various tax schemes and incentives to reduce taxpayers’ tax burden. Among these is the certificate of residence (COR).
A COR may be issued to any individual or company which is a Singapore tax resident. One of the benefits granted to any individual or company which has a COR is access to lower tax rates, acquisition of tax credits, or even tax exemption. This can be done due to Avoidance of Double Taxation Agreements (DTAs). A DTA is a tax treaty signed between Singapore and another country which will prevent double taxation of certain types of income earned in one country by a tax resident of the other. Among the types of income that are covered under a DTA include business profits, dividend payments, capital gains, and directors’ fees. In the case of companies that have a COR, although they are still required to pay taxes to the foreign tax authority in their home country, they may claim benefits as mentioned in the relevant DTA.
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There are several criteria that must be fulfilled before the IRAS can give out a COR to a company. The most important of these is that the company must have its control and management policies maintained by its Singapore office. Thus, the company must prove policies, control, and strategic management of the company are exercised in Singapore. It should also be mentioned that the location of the company’s incorporation does not necessarily have to be the same as the location of the company’s tax residence. Due to multiple cases of manipulation and fraud, the IRAS keeps a close eye on all companies that apply for a COR. The COR and evidences required to receive one are assessed by the IRAS before it hands out the certificate.
Some people may be unsure if they or their company are capable of obtaining a COR. In such cases, a visit to a consultation firm may be helpful. Such firms will give the potential applicant more information about the COR. Those who are or whose company is eligible may also seek the consultation firm’s help in making a tax assessment.