Singapore's wide network of tax treaties can help companies better manage international tax obligations. However, to leverage these advantages, firms must first apply for a Certificate of Residence (COR) from the tax authority in Singapore.
For foreign-owned companies, the eligibility criteria have recently been revised to align with global tax developments and stringent requirements to prove economic substance. This article will explain the role of the COR, outline the updated requirements for foreign-owned companies, and discuss what these changes mean for businesses.
What is a Certificate of Residence (COR) in Singapore?
A COR is an official letter provided by the Inland Revenue Authority of Singapore (IRAS) to certify that a company is a tax resident of Singapore for a specific calendar year. Tax residency of a company is determined based on whether its control and management of the business is exercised in Singapore. This typically refers to the place where strategic decisions on the company’s policies, directions and strategies are made.
Purpose of the COR
The COR will enable a Singapore tax resident company to access treaty benefits under the comprehensive network of Avoidance of Double Taxation Agreements (DTAs) that Singapore has signed with other countries. These benefits could either be in the form of a reduced withholding tax rate or a full exemption of taxes on the income, effectively eliminating double taxation for companies.
Eligibility criteria for COR application
A COR is issued to a Singapore-incorporated company that is also a tax resident of Singapore. This means that a Singapore-incorporated company does not automatically qualify to be a tax resident of Singapore unless its control and management of business is in Singapore. The place of control and management is usually where the Board of Directors (BOD) conduct their meetings to make key decisions.
However, holding BOD meetings in Singapore alone does not suffice as IRAS looks at additional factors as well, some of which are listed below, to determine if the control and management is indeed in Singapore:
- Director location: Are the directors based in or outside Singapore?
- Local representation: Is there a local director who makes strategic decisions for the company?
- Key employee presence: Are key employees such as the Chief Executive Officer (CEO), Chief Financial Officer (CFO) or Chief Operating Officer (COO) based in Singapore?
In the case of BOD meetings held virtually, the IRAS will consider strategic decisions being made in Singapore only if 50% of the directors (with authority to make strategic decisions) or the Chairman of the BOD are physically in Singapore during the meeting.
Generally, it is relatively easy for companies operating in Singapore with executive directors and/or key employees based in Singapore to apply for a COR from IRAS. However, foreign-owned investment companies and nominee companies face stricter scrutiny and are typically not eligible.
Updated requirements for foreign-owned companies from 2025
A foreign-owned investment company is not considered a Singapore company where at least 50% or more of its shares are held by foreign shareholders (i.e. foreign companies and/or individuals who are non-citizens of Singapore).
That said, if the foreign-owned company is able to demonstrate that its control and management of business is exercised in Singapore and it has a valid reason for setting up office in Singapore, IRAS may still issue a COR to the company.
Starting from the calendar year 2025 onwards, foreign-owned companies applying for a COR will need to fulfil one of the following:
Under the revised guidelines, foreign-owned companies will need to clearly demonstrate to the IRAS that there are realistic economic substance and decision-making in Singapore and key management are based here. This may require restructuring corporate governance to involve a Singapore-based related company in strategic decisions or appointing an executive director or key employee who is permanently stationed in the country.
This will align with global tax reforms introduced under the Base Erosion and Profit Shifting (BEPS) framework by the Organisation for Economic Co-operation and Development (OECD), which are being implemented to prevent the abuse of tax treaty benefits by non-resident or shell companies.
By showing that strategic decisions and day-to-day operations are genuinely rooted in Singapore, companies may confidently access the benefits of the extensive tax treaty network here.
Next steps
At Hawksford, we provide executive director services that can support companies in fulfilling the requirements for COR applications in Singapore. If you have any questions or would like to find out more on our range of services, do not hesitate to reach out to us today.
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