Tax Residency of Companies

In Singapore, the tax residence status of a company depends on where the control and management of its business is exercised.

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. However, there are some benefits that a resident company enjoys which a non-resident would not. These are:

• Benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.
• Tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act.
• Tax exemption scheme for new start-up companies.

Singapore resident companies are also eligible for partial tax exemptions in the form of lower effective tax rates capped at 8.5% on the first S$300,000 of its chargeable profits per year of assessment.

Singapore tax exemptions are allowed on foreign sourced profits and dividends that are remitted to Singapore if the headline tax of that country from where the income was sourced is a minimum of fifteen percent and the foreign income had been subjected to tax in the foreign country from which they were received. Irrespective of the headline tax rates of the foreign country, these foreign incomes will be fully exempt from Singapore taxes if not repatriated or remitted directly or indirectly to Singapore.

A resident company enjoys tax benefits bestowed under the Avoidance of Double Taxation Agreements. An Avoidance of Double Taxation Agreement between Singapore and another country prevents double taxation of income earned in one country by a resident of the other country. It clarifies the taxing rights between Singapore and her treaty partner on different types of income arising from cross-border economic activities between the two countries. The agreements also provide for reduction or exemption of tax on certain types of income.

A non-resident company is eligible for the partial tax exemption.

A. Exempt amount

B. All foreign income of non-resident company is subject to 17% tax after the above Partial exemption. They are also not eligible to avail for DTA benefits.