A certificate of residence (COR) is a letter certifying that its beneficiary is subject to tax in a certain country. It specifies that the beneficiary is a tax resident of that country and is to be taxed as such. In Singapore, both individuals and companies can be eligible for certificates of residence.
Certificate of Residence (Individual)
Singapore tax residence certificates (Certificate of Residence is a letter certifying that you are a tax resident in Singapore for the purpose of claiming benefits under DTA) are issued by the Inland Revenue Authority of Singapore (IRAS). For the IRAS to consider an individual to be a Singapore tax resident, the individual must either have lived or worked in Singapore for at least 183 days in the calendar year preceding the year of assessment (YA). Even if this condition is not fulfilled, individuals will nevertheless be regarded as Singapore tax residents if they reside in Singapore and can prove that their absences from the country are temporary and reasonable. If at least one of these conditions is fulfilled, the individual may make a COR application. However, if the individual is a foreigner, there is another condition to be fulfilled. Before individuals are allowed to work in Singapore, they must first obtain an Employment Pass. The Employment Pass is issued by the Ministry of Manpower to those who meet the following criteria: having a job offer in Singapore; working in a managerial, specialized, or executive job; earning a fixed monthly salary of at least S$3,600; and possessing the requisite qualifications.
Paul Hype Page & Co offers a variety of services related to the Employment Pass. Should you require our assistance in obtaining an Employment Pass, we will assess your application and ensure that it fulfills the Ministry of Manpower’s current standards.
Generally, individuals who apply for a Singapore tax certificate of residence do so to avoid full taxation from a foreign country. This is because these individuals are earning income derived from abroad. However, Singapore has signed Avoidance of Double Taxation Agreements (DTAs) with many countries. These countries are known as “treaty countries”. A DTA states the taxing rights between Singapore its treaty partner on different types of income arising from any economic activity between the two countries. These agreements also provide for tax exemptions or reductions on specific types of income. Thus, an individual who is a Singapore tax resident will benefit from these exemptions or reductions. As long as the individual fulfills all the necessary criteria to obtain the certificate of residence, the individual will receive it after submitting the application for the certificate of residence to the IRAS and will then be able to submit it to the foreign tax authority. By submitting the certificate to the foreign tax authority, the individual is able to prove tax resident status and will be able to claim the tax benefits.
The converse of the above is also true. If a foreign individual is a tax resident of a country with which Singapore has a DTA providing for Singapore income tax exemption regarding Dependent Personal Services rendered in Singapore, the individual could potentially apply for a tax exemption. To claim the tax exemption, the individual would have to submit a certificate of residence that has been certified by the individual’s home country’s tax authority to the IRAS.
Certificate of Residence (Company)
Companies may also apply for Singapore tax certificates of residence. Just as with individuals, the IRAS also issues certificates of residence to companies to state that a particular company is a Singapore tax resident. A company is a tax resident of Singapore if its control and management is exercised in Singapore. When the IRAS issues a certificate of residence to a company, it takes the following factors into account before doing so: the company’s decision-making body’s power to raise finance and maintain control over the company’s bank accounts; declare dividends; approve accounts; appoint people to manage the company’s daily operations; and decide on issues related to acquisitions, joint ventures, and mergers. A company requesting a certificate of residence must provide its full name, registration number, and YA for which the certificate is required to receive the certificate. To receive a certificate, the company’s directors must also live and keep the company’s books and records in Singapore.
In Singapore, a company may use a certificate of residence to establish its eligibility for certain tax exemptions regarding its profits remitted from foreign operations. These profits may include foreign branch profits, dividends, and foreign-sourced income. Another benefit eligible companies may receive is similar to the one received by eligible individuals. It provides tax benefits under DTAs that Singapore has concluded with other countries. New start-up companies that have certificates of residence may also claim a tax exemption. After having its certificate of residence approved by the IRAS, the company becomes eligible for the benefits.
The company should be able to supply supporting documents to prove that it exercises its control and management in Singapore. “Control and management” is defined as the making of decisions related to the company’s strategic matters or policies. Examples of such documents include the following: board resolutions and minutes of the board of directors’ meetings, material contracts signed in Singapore which have to do with the taxpayer’s business, and any correspondence between the management team or board of directors proving that discussions and decisions were made during meetings conducted in Singapore. If the board of directors or management team is based outside Singapore, travel calendars and passport copies can also prove that the directors and management team frequently spent time in Singapore.
Singapore branches of a foreign company that has its headquarters abroad are not regarded as residents and thus normally cannot receive a certificate of residence or the benefits it confers. The same is true of foreign-owned investment holding companies. These companies are defined as those which have at least 50% of shares held by foreign companies and shareholders. They are not regarded as residents because these companies normally act on the instructions of foreign parent companies or shareholders. For example, a holding company owned by a non-Singapore entity receiving only foreign-sourced income will not be seen as a Singapore tax resident. Despite this, the IRAS might issue a certificate of residence if the company can prove that the control and management of the company’s business is exercised in Singapore, as well as that the company has valid reasons for setting up an office there. The company must also satisfy one of the following conditions to qualify for a certificate of residence: having related companies in Singapore that are either tax residents of or have business activities there, receiving support or administrative services from a related company which is based in Singapore, having at least one director based in Singapore who is not a nominee director but holds an executive position; or having at least one key employee based in Singapore.
Similarly, non-Singapore incorporated companies are also not regarded as residents because they are managed and controlled by their foreign parent companies. However, the IRAS may issue a certificate of residence to foreign incorporated companies and its Singapore branches if the company can prove that the control and management of the company’s business is exercised in Singapore, as well as that the company has valid reasons for setting up an office there. The IRAS may request additional information about the company at any time.
Recently, the Monetary Authority of Singapore confirmed that a Variable Capital Company (VCC) can also benefit from a certificate of residence. A VCC which is a Singapore tax resident is allowed to apply for a certificate of residence. After the certificate is approved, it will be issued in the VCC’s name and will give the names of all the VCC’s sub-funds receiving the same income from the same source jurisdiction.
A Singapore tax certificate of residence is an extremely important and powerful document for any Singapore tax resident. Having one opens many doors and allows its bearer to benefit from a number of tax benefits.
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Here, you will find detailed information about Singapore’s Corporate Tax System. Paul Hype Page & Co helps companies with strategic tax planning, tax advisory, and accountancy services.
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IRAS (Singapore’s Tax Authority) governs Singapore’s tax system, helps develop a stronger economy, better environment and a more vibrant economy. All companies, regardless of industry, have a legal duty to pay taxes.
Singapore attracts investments from around the world by reducing its corporate income tax rate and introducing different tax incentives. Singapore has one of the lowest corporate tax rates in the world.
As your company’s Tax agent , Paul Hype Page & Co Chartered Accountant will be fully responsible for the practice of ensuring that these conditions are met. It is important that we be highly qualified and well versed in local regulations and corporate laws, as we are responsible for the upkeep of important company files, tax reports and tax records.
Categories: Singapore Taxes