Singapore has been a favoured jurisdiction for many business owners and entrepreneurs globally due to its strong regulatory framework, friendly business environment, extensive trade agreements and double tax treaties. Due to the OECD’s Base Erosion and Profit Shifting Project, there has been a growing emphasis on the Economic Substance of companies in their country of domiciliation.

Recently, the Inland Revenue Authority of Singapore (IRAS) has released an updated requirements in relation to the Economic Substance requirements for business and also Section 10L of the Income Tax Act 1947 has been passed into legislation on 1 January 2024.

Under Section 10L, certain gains from the sale or disposal of foreign assets are treated as income chargeable to tax when received in Singapore. Foreign-sourced disposal gains from the sale or disposal of a foreign asset (other than an intellectual property right) will not be treated as income chargeable to tax in Singapore if the entity making the sale or disposal has adequate economic substance in Singapore. We will elaborate more on Section 10L on our next writeup.

As a starting point for ensuring the Company’s economic substance Singapore, the management should ensure the Singapore’s tax residency requirements for Companies are being fulfilled. 

In our previous article, we had discussed on the economic substance including Control and Management of a Singapore Company. In this article, we focus more on the requirements for the Company to obtain a certificate of residence from the IRAS.

Certificate of Residence

For Companies looking to tap onto the benefits of Singapore’s extensive double tax agreements, the Company would be required to obtain a Certificate of Residence from the IRAS.

Generally, income derived by a Singapore tax resident company from foreign persons or companies may be subject to tax in that foreign jurisdiction.

Under the Double Tax Agreements (DTAs) or Limited Treaties that Singapore has concluded with foreign jurisdictions (i.e. DTA partners), Singapore tax residents may enjoy tax benefits (e.g. tax exemptions or lower withholding tax rates) on income derived from the foreign jurisdictions. Non-residents do not enjoy these benefits.

To enjoy such tax benefits, the Certificate of Residence (COR) is required by and must be submitted to the tax authority of the DTA partners to prove that the company is a Singapore tax resident.

The COR is a letter issued by IRAS to certify that the company is a (i.e. the control and management of its business is exercised in Singapore) for the purpose of claiming tax benefits under the DTAs that Singapore has concluded with other jurisdictions. It is generally required by the foreign tax authority to prove that the company is a Singapore tax resident.

Eligiblity for a Certificate of Residence

In order to obtain a COR, a company must be a tax resident of Singapore. Generally, foreign-owned investment holding companies, nominee companies and non-Singapore incorporated companies are not eligible for a COR.

Variable Capital Companies (VCC)

For tax purposes, a VCC incorporated under the Variable Capital Companies Act 2018 is treated as a company.

In order to obtain a COR, a VCC must be a tax resident of Singapore. The tax residence of a VCC’s sub-funds is determined at the umbrella level of the VCC. The VCC, and not the sub-fund, has to apply for the COR. The COR will show the details (tax reference number and name) of the VCC and sub-fund.

Foreign-Owned Investment Holding Companies

A foreign-owned company is a company where 50% or more of its shares are held by:

  • Foreign companies that are incorporated outside Singapore; or
  • Individual shareholders who are not citizens of Singapore.

The ownership is applied at the ultimate holding company level.

Foreign-owned investment holding companies with purely passive sources of income and receiving only foreign-sourced income are not eligible for a COR.

However, IRAS may still issue a 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 IRAS that their Board of Directors’ meetings are held in Singapore). The company must also:

  • Have related companies in Singapore that are tax residents of Singapore or have business activities in Singapore;
  • Receive support or administrative services from a related company in Singapore;
  • Have at least 1 director based in Singapore who holds an executive position and is not a nominee director; or
  • Have at least 1 key employee (e.g. CEO, CFO, COO) based 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:

  • Have at least 1 director based in Singapore who holds an executive position and is not a nominee director;
  • Have at least 1 key employee (e.g. CEO, CFO, COO) based in Singapore; or
  • Be managed by a related company based in Singapore (e.g. the related company makes the decisions relating to the operations of the foreign-owned investment holding company or reviews the performance of the investments of the company)

The above is to allow companies to better substantiate that they have valid reasons for setting up operations in Singapore.       

Nominee Companies

Nominee companies are not eligible for a COR as they are not the beneficial owner of the income derived from the DTA partner. A nominee company is a company that acts as a custodian of shares on behalf of the beneficial owners.

Non-Singapore Incorporated Companies

Non-Singapore incorporated companies are not eligible for a COR as these companies are not controlled or managed in Singapore. This also applies to Singapore branches of foreign companies, as they are controlled and managed by their overseas parent company.

However, in exceptional situations, IRAS may still issue a COR if these companies can show that:

  • The control and management of the company’s business is exercised in Singapore (i.e. the Singapore branch is exercising the full control and management of the company); and
  • The company has valid reasons for not incorporating in Singapore.

IRAS may request for additional information on the company.

Ensuring Tax Residency and Economic Substance in Singapore

In ensuring the “Management and Control” is being met in Singapore, Companies need to ensure that Board Meetings are properly held in Singapore and meets the criteria as set out earlier in our article on the Board Meeting requirements.

Further, Companies need to ensure that they fulfil the necessary economic substance requirements such as having an executive Director in Singapore and have at least 1 key employee (e.g. CEO, CFO, COO) based in Singapore or is managed by a related company based in Singapore.

At Prestige, we support our clients in ensuring their tax residency and economic substance with our suite of services:

  • Provision of Professional Singapore Resident Director
  • Preparation of Board Meeting Packs
  • Attendance and minuting of Board Meetings
  • Tax Advisory on Economic substance and compliance
  • Reviewing the performance of the investments of the company
  • Accounting and Corporate Secretarial Services

Prestige is a Venture Capital and Technology Company Focused Practice. We support Venture Capital Funds and Technology Companies on various areas including:

  • Accounting and FRS Advisory
  • Tax Compliance and Advisory for Companies
  • Tax incentives application and advisory for Funds domiciled in Singapore
  • Fund Administration
  • General Partner Operations Support
  • Venture Capital Funds Portfolio Companies Support
  • Singapore and Malaysia Company Incorporation
  • Singapore VCC Incorporation
  • Corporate Advisory Services
    • Board Pack Preparation
    • Outsourced
    • Mergers and Acquisition
    • Pre-IPO Advisory
    • Revenue Management Analysis
    • Financial and Tax Due Diligence

Please contact us at dongneng@prestigefiduciary.com for further information on our services.

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