Tax Residency Certificate in Singapore – Why Apply and How

The tax residency certificate in Singapore is called a Certificate of Residence or COR. It is a letter which certifies a company as a tax resident, allowing the company to enjoy specific benefits related to foreign earned income.

What companies are eligible to apply for a tax residency certificate?

The first step is to qualify as a tax resident of Singapore. Thereafter, the company can apply for the COR from the Inland Revenue Authority of Singapore (IRAS).

However, the following types of corporate structures are not eligible:

1. Nominee company: it is not a beneficial owner of the income derived from a treaty partner and it acts as a custodian of shares on behalf of its beneficial owners
2. Sole-proprietorship and partnership businesses registered in or outside Singapore: these do not fall within the definition of a company according to IRAS but exceptions can be made if it fulfills certain conditions set by IRAS
3. Foreign-owned investment-holding company: exceptions can be made if it fulfills certain conditions set by IRAS
4. Non-Singapore incorporated company: exceptions can be made if it fulfills certain conditions set by IRAS

Why apply for a COR

Following are the benefits that can be enjoyed by companies for foreign income if they possess the certificate:

1. tax benefits provided under Avoidance of Double Taxation Agreements (DTAs) which Singapore concluded with other jurisdictions;
2. tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act; and
3. tax exemption for new start-up companies.

The Double Taxation Agreement (DTA) is signed between Singapore with a list of countries referred to as ‘treaty partners’. Its purpose is to help Singapore tax residents avoid being double-taxed for income earned outside of Singapore. The income earned in another country may be taxed by the government of that country. 

The DTA offers tax breaks such as tax exemptions and lower withholding tax rates to COR holders on income derived from treaty partners. Companies must submit the COR to the tax authority of the treaty partner to prove their status as a Singapore tax resident.

Treaty partners may have slightly varying procedures. Some may require the Singapore tax resident to also submit a Tax Reclaim Form issued by the treaty partner. This is especially the case for DTAs with Limitation of Relief provisions where the tax has to be remitted.

What if a company does not want to claim any benefits under the DTA or Limited Treaty but wishes to obtain a COR anyway? This is what it can do – write to IRAS on the company’s letterhead with the following information:

• Name and Unique Entity Number (UEN) of the company;
• Reason(s) for requesting the letter of residence;
• Confirmation that the control and management of the company is exercised in Singapore; and
• Calendar year for which the letter is required.

How to apply for a COR

All applications have to be e-Filed via myTax Portal except for specific circumstances. Applications can be done for the current calendar year or up to 4 back calendar years.

The applying company must first authorise its staff or a tax agent (a third party) for Corporate Tax (Filing and Applications) in CorpPass. Then, its authorised personnel can log in to apply for the certificate on its behalf.

When should the application be made?

It should be done one advance calendar year from October to December of the current calendar year. The application will be processed by IRAS within 7 working days from receipt. The COR will then be mailed to the company’s registered address and a copy will be available in the myTax Portal.

Here are quick links to the User Guide for Companies and FAQ provided by IRAS.

Wrap Up

The Certificate of Residence is clearly advantageous for many companies including local firms with incomes of foreign sources. The DTA is very attractive for foreign companies with Singapore tax residency if their home branch is located in a treaty partner.

A corporate service provider such as Intime Accounting, with a dedicated corporate tax division, can facilitate all the applications requirements and procedures so that companies can focus on their core business activities.  

Other relevant articles:

• 6 Reasons Companies Should Use Corporate Tax Services
• 2020 Guide on How to Reduce Corporate Tax in Singapore
• Tips for Corporate Tax Filing in YA2020
• Types of Taxes to be Aware of in Singapore
• What is Withholding Tax in Singapore?
• About Tax Residency of a Company in Singapore
• Stamp Duty for Variable Capital Companies in Singapore
• What is a Tax Reclaim Form?
• How to Manage Tax for a Dormant Company