According to tax law in Singapore, a company’s tax residency is determined by where its business is managed and controlled. This status can change on a yearly basis.
Typically, a company is considered a Singapore tax resident for a specific Year of Assessment (YA) if its business was controlled and managed in Singapore during the previous calendar year. For instance, if a company’s control and management were exercised in Singapore for the entirety of 2022, it would be a Singapore tax resident for YA 2023.
If a company’s control and management are not exercised in Singapore, it is classified as a non-resident.
The term “control and management” refers to making strategic decisions about a company’s policies and strategies. The actual location where a company’s control and management are exercised is a matter of fact.
Usually, the location of a company’s Board of Directors meetings, where strategic decisions are made, determines where the control and management is exercised. However, there are some scenarios where holding meetings in Singapore may not be sufficient to determine tax residency. In such cases, the Inland Revenue Authority of Singapore (IRAS) will consider all information provided by the company to make a determination.
Examples of situations where control and management of a company may not be considered exercised in Singapore include:
- There is no board of directors meetings held in Singapore;
- The local director is merely a nominee while the rest of the directors are based outside Singapore;
- No strategic decisions are made by the local director in Singapore, and
- No key employees are based in Singapore.
It’s important to note that the place of incorporation of a company is not necessarily indicative of its tax residency.
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