Tax Residence of Singapore Company

A company is considered as resident in Singapore if the control and management of the business is exercised in Singapore. Although the term “control and management” is not defined explicitly by authorities, a generally accepted consensus is that it refers to the policy level decision making at the level of Board of Directors and not the day-to-day decision making and operations.

In general, a company is considered non-resident in Singapore if the directors manage and control the business and hold board meetings from outside Singapore. This is true even if, for example, the lower level operations are taking place in Singapore. A company’s residence may change from one year of assessment to the next depending on the circumstances. A Singapore branch of a foreign company is generally not treated as a Singapore tax resident since the control and management is vested with an overseas parent company.

The basis of taxation for a resident company and non-resident company is generally the same except for certain benefits that are available to resident companies. These include:

• A Singapore resident company is eligible for tax exemption scheme available for new start-up companies.
• A Singapore resident company can enjoy tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act.
• A Singapore resident company is entitled to benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.

A Singapore resident company is only taxed on Singapore source income and foreign income which is remitted to Singapore. A non-resident Singapore company would pay tax only on Singapore source income.