Residency Corporate Tax in Singapore
This article intends to explain the meaning of a resident company in Singapore. You become aware of the term like COR as well as the procedure of applying for this status.
Corporate tax rates in Singapore are one of the most competitive. In addition to low corporate taxes, companies also enjoy incentives and tax reliefs through various schemes that are designed for better tax compliance. Singapore has tax treaties with a large number of countries to help companies avoid double taxation. All this make Singapore a great place to do business and to invest money.
COR stands for Certificate of Residency. It is a certificate for a company from IRAS that states that it will be treated as a tax resident so as to help it avoid double taxation. A tax resident company means that the company is managed and controlled from inside Singapore. All the benefits that are outlined in DTA’s that Singapore has signed with other countries are available to tax resident companies.
Misuse of COR
In the past, there have been a few instances where companies have abused COR status. This is the reason why IRAS is today much more careful and strict in issuance of COIR status to companies. Companies that get COR are entitled to the benefits that accrue to them under DTA’s.
The status of tax residency
According to the income tax act, whether a company is tax resident or not is decided by the place from where it is managed and controlled. It means that the controlling authority of a company is in Singapore if it has tax residency status. Such an authority is usually taken as the Board of Directors as they are responsible for making the fundamental policies of the company. Control and management means the power to raise the finances, to disprove or approve accounts, power to appoint executives that look after day to day operations of the company, power to decide on merger, acquisitions, JV’s etc, power to control the bank accounts, and to declare dividends and bonuses to shareholders. If you are a stakeholder in a company and desire it to be given a tax resident status, it is prudent to have as many meetings of the board of directors in Singapore as possible. This should not be a problem for you as Singapore is already a regional commercial hub for most companies in the Asia Pacific region. The other important factors that decide tax residency status of a company are the addresses of its directors and the physical location where the records of the company are kept. It should be thus clear to you that it is not always the place where a company conducts its business related activities or physical operations that used by the company for tax residency.
If you are desirous to be labeled as a tax resident company in Singapore by the authorities (proved by the Certificate of Residency issued by IRAS), you must fulfill all legal requirements. You may find it difficult to get this certificate from the IRAS if you are an investment holding company that receives income from abroad and is owned by a foreign national or any other foreign entity. You may be required to prove that your company is controlled and managed inside Singapore. Make sure that you are providing solid evidence to the tax authorities when declaring your annual tax returns to hold on to tax resident status if you already have it as there have been cases where companies have found to their dismay their resident status getting vanished in thin air when they failed to give concrete evidence of the control and management of the company.
Eligibility for tax residency certificate (COR)
A company that is tax resident is eligible to apply for COR. This application can be for assessment of previous or back years, current year, or even the coming year.
If the income from the company is being sent into Singapore
A company is not eligible for tax residency if it is a nominee company. Such a company is in existence only to hold on to the shares on behalf of the actual owner who is also the beneficiary. Another case of non eligibility is a foreign owned company that only serves the purpose of receiving passive income. But such a company can apply for COR if it can convince the authorities about the reasons for setting up offices in Singapore. If it can furnish proof of control and management of the company from within Singapore, it can get COR status. IRAS mainly looks at the following features when deciding in favor of COR.
- Singapore happens to be the venue of Board of Directors meetings even though these meetings decide only routine matters.
- If the company has other sister concerns involved with trade related activities
- If the company is helped by a resident company in Singapore in administrative matters
- If there is at least one director of the company who is a resident and not a nominee director
- If one of the main employees (whether CEO or COO) happens to be a Singapore citizen living in Singapore
Even a company that has not been incorporated in Singapore can be given COR status if the authorities are satisfied that there are valid reasons for not getting incorporated in Singapore. It is enough for IRAS to be convinced that the control and management of the company is indeed in Singapore.