On or about 5 August 2019, the Inland Revenue Authority of Singapore (IRAS) has updated the content in its website on determining the tax residence of foreign-owned investment holding companies.
A company is either a tax resident or a non-resident of Singapore. In Singapore, the tax residency of a company is determined by the place in which the business is controlled and managed.
Generally, a company will be considered to be a Singapore tax resident for a particular Year of Assessment (YA) if the control and management of its business was exercised in Singapore in the preceding calendar year.
Foreign-owned investment holding companies with purely passive sources of income or receiving only foreign-sourced income are generally regarded as non-residents as they usually act on the instructions of its foreign companies or shareholders.
However, they may still be considered as Singapore tax residents if they can satisfy the IRAS that certain conditions have been met.
For details on the conditions, please visit IRAS website on “Applying for COR for Foreign-Owned Investment Holding Companies”.
Examples of some scenarios whereby the control and management of a business is considered to be not exercised in Singapore, include but are not limited to:
- There is no board of directors meeting held in Singapore. Instead, the directors’ resolutions are merely passed by circulation
- The local director is a nominee director while the rest of the directors are based outside Singapore
- No strategic decision made by the local director in Singapore
- No key employees are based in Singapore
Source: IRAS website, 5 August 2019.