In Singapore, the tax residence status of a company depends on where the control and management of its business is exercised. A company is tax resident in Singapore if the control and management of its business is exercised in Singapore.

“Control and management” refers to the making of decisions on strategic matters, such as those on company policy and strategy. The meaning of this “control and management” is derived from common law principles— being the directing authority that controls the affairs of a company, usually the strategic management and decision-making body (the Board of Directors who make the fundamental policies of the company’s business). Such distinguishing factors of this control and management include the body’s power and ability to raise finance; to approve accounts; to appoint those who manage the company’s day-to-day operations; to declare a dividend; to decide on matters relating to a merger/acquisition/joint venture; and has control of the company’s bank accounts.

Where the control and management of a company is exercised is a question of fact. Typically, the location of the company’s Board of Directors meetings, during which strategic decisions are made, is a key factor in determining where the control and management is exercised.

Do note that the assessment of control and management should be based on the Board of Directors meetings instead of AGMs. It is a common misconception that an AGM is considered as being a Board of Directors meeting. An AGM is a mandatory annual meeting of shareholders rather than directors, whereby shareholders may raise queries regarding the financial position of the company based on the financial statements presented.

In the event that board meetings are conducted via conference call/video-conferencing, the tax residency of the company will generally be regarded as having strategic decisions made in Singapore if either of the following conditions is met:

• At least 50% of the directors (with the authority to make strategic decisions) are physically in Singapore during the meetings; or

• Chairman of the Board of Directors (if the company has such an appointment) is physically in Singapore during the meeting.

The basis of taxation for a resident company and non-resident company is generally the same. However, there are some benefits that a resident company can enjoy that a non-resident would not. These include:

– It is entitled to benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.
– It can enjoy tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act.
– It can enjoy the tax exemption scheme for new start-up companies.

In order to be considered a Singapore tax resident, it is advisable to have as many of its Board meetings in Singapore, showing that key decisions by the controlling and managing authority of the company are made in Singapore— this is not at all a problem because, being an aviation hub for the Asia-Pacific region, Singapore is well-placed logistically to be a convenient venue for such board meetings. To further support the company’s case of being tax resident in Singapore, where the directors live, and the physical location of the books and records of the company are also important. Hence, where a company conducts its trading activities or physical operations is not necessarily where it is tax resident.

Generally, a Singapore branch of a foreign company is not treated as a Singapore tax resident since the control and management is vested with an overseas parent company.