The world is becoming a global village but even though it stands true, expansion is not as easy as it sounds. Whenever any company plans to expand its reach, the first thing that strikes them is the taxation norms and rates.
No one would like to establish themselves in a foreign country where they barely earn anything owing to exorbitant taxes and stringent norms.
So Singapore, silently reiterating why it is called the Asian hub of business, has introduced another reform, the Certificate of Residence (COR), to make it easier for foreign companies to establish themselves in the country.
This article discusses COR, its eligibility, and its application process.
What is a COR?
COR is an indication that the individual or company owning it has qualified for tax residence status. It is a letter that would help entities holding it to claim benefits under the DTA (avoidance of Double Tax Agreement).
It enables registered companies to enjoy the benefits of over 76 DTAs (double taxation agreements) signed by the Singapore government with several other countries in the world.
Importance of COR
When you earn income in a foreign land, it can be subjected to tax in that country. However, the same income can also be subjected to tax in your local country. So you end up paying double the taxes on the same income.
Most countries have signed DTAs with each other to prevent double taxation. It provides clarity with regards to the tax you are to pay and when and where to pay it. In addition, foreign countries often offer tax breaks as a gesture for support, where they exempt your income generated in their country or provide credits for tax deducted.
But for you to make use of such benefits, you will first have to be a tax resident. Be it an individual or company assessee, a COR is a document that proves that the receiving company is a tax resident of Singapore. It means that its control and management are exercised in the country.
It is why COR is vital for every assessee earning foreign income. While it is not mandatory for every business or individual assessee, who would actually like to pay double taxes on the same income?
Who issues the COR in Singapore?
The Inland Revenue Authority of Singapore (IRAS) issues the COR to all the eligible assessees. They only accept e-Filed applications unless there are special circumstances. You can apply for COR for the current calendar year or up to four previous calendar years. In addition, you can also start to apply for one advance calendar year from October to December of the current calendar year.
Companies eligible to apply for a Singapore COR
The primary criteria of applying for a COR is that the company must be a tax resident of Singapore. Here are the entities eligible for getting a COR in Singapore –
Nominee companies are not eligible to apply for COR as they are not the beneficial owner of the income derived from the treaty partner. A nominee company is a company that acts as a custodian of shares on behalf of the beneficial owners.
Foreign-owned investment holding companies
In usual circumstances, a foreign-owned investment holding company is ineligible to receive a COR in Singapore as it relies on foreign-sourced incomes and payments. But here are the exceptions –
- The company has set up an office in Singapore for valid reasons
- Its control and management are exercised in Singapore
In addition, any of the following criteria are to be met –
- Have related companies in Singapore that are tax residents of Singapore or have business activities in Singapore
- Have at least one director, not a nominee director, holding an executive position based in Singapore
- Have at least one top-level employee (COO, CFO, or similar) based in Singapore
- Receives support or administrative services from a related company in Singapore
Non-Singapore incorporated companies
A non-Singapore incorporated company is not managed or controlled in Singapore and is not eligible for a Certificate of Residence. But here are the exceptions when these entities can apply for it –
- Its Singapore branch exercises complete control and manages the Singapore operations
- There are valid reasons for not incorporating the business in the country
- Any other reason as specified by IRAS
Where can you obtain a COR in Singapore?
Entities can apply for COR via IRAS’ myTax Portal. Presently, except for specific circumstances, hard copies are not accepted. It is granted to entities whose control and management are exercised in Singapore in the specified calendar year.
Hard copy application is only applicable for companies that are –
- Non-Singapore incorporated companies
- Applying COR for a partnership business of which the company is a partner
- Applying COR for a sole proprietorship business owned by the company
Steps to apply for COR
Now that you know the criteria for applying for a COR, the next step is to apply for one. Before you do so, here is the information that IRAS will seek from you so that you can prepare in advance –
- Name of the company
- A confirmation that the company is not an investment holding merely as a passive source of income
- A confirmation that the company is not a nominee company formed for holding shares on behalf of its beneficial owners
- A confirmation stating that it is not dormant
- Proof of whether it is only receiving foreign income or not
- Name of the treaty country with which Singapore has signed a DTA agreement
- Actual or estimated income
- Nature of income
- Name of the entity from whom income is received
- Date/s of remittance of income. If the payment has not yet been received, provide an expected date of receipt
- Year/s of assessment for which the COR is required
- Name/s of the beneficial owner
- A confirmation that the application is made to benefit from DTAs
- A confirmation that the company’s control and management for the entire period for which you need COR is/will be applied in Singapore
After collecting the requisite information, you can visit the IRAS’ myTax Portal and apply for a COR. The application takes up to 14 days from the date of receipt of complete information to process. In some instances, it can take longer.
Once approved, you can view your digital copy on the portal and have the option to download or print it.
A COR is a vital document that helps you to carry your foreign operations with ease. Thanks to the DTA agreements, companies no longer have to go through the hassle of multiple taxes on their income and can now expand with ease.
While owning a COR is not mandatory, we suggest you apply for one if you have or expect income from foreign sources.
For more information, reach out to us at Intime Accounting.