IRAS issues new guidance for determining tax residency of a company

     

Singapore tax law determines a company’s tax residency based on where its business is controlled and managed. Generally, this means that a company is considered Singapore tax resident for a particular year of assessment (“YA”) if its control and management was exercised in Singapore in the preceding calendar year. ‘Control and management’ is defined as the making of decisions on strategic matters such as those concerning the company’s policy and strategy. 

       

In practice, IRAS generally assesses the location of BOD meetings to determine where strategic decisions are made. For foreign owned investment holding companies (where at least 50% of its shares are held by foreign companies or individual shareholders who are not Singapore citizens) deriving only passive sources of income, the IRAS requires them to demonstrate that strategic decisions are made at BOD meetings held in Singapore (in addition to other factors). 

       

Due to the rising prevalence of hybrid or virtual meetings and recent amendments to the Companies Act 1967 (permitting virtual and hybrid company meetings), the IRAS has issued (1) new guidance on determining where strategic decisions are made for hybrid or virtual BOD meetings; and (2) revised considerations for determining whether a foreign owned investment holding company has exercised its control and management in Singapore.

        

For virtual BOD meetings (defined as any technology that allows a person to participate in a meeting without being physically present at the place of meeting), strategic decisions will be regarded as made in Singapore (and hence a Singapore tax resident) if either of the following conditions is met:

 

The IRAS may issue a Certificate of Residence (“COR”) if these companies can show that the control and management of the company’s business is exercised in Singapore; and the company has valid reasons for setting up an office in Singapore. This includes demonstrating that decisions on strategic matters are made in Singapore (e.g., by showing the IRAS that their BOD meetings are held in Singapore). 

      

For COR applications in respect of calendar year 2025 and after, apart from demonstrating that decisions on strategic matters are made in Singapore, the company must also: