The Inland Revenue Authority of Singapore (IRAS) issued updated guidance on the tax residence status of companies and permanent establishments (PE) in light of the Covid-19 pandemic.

Tax Residence Status of a Company

Where a company is not able to hold its Board of Directors meeting in Singapore due to the travel restrictions relating to COVID-19, IRAS is prepared to consider the company as a Singapore tax resident for Year of Assessment (YA) 2021 and/or YA 2022, provided it meets all the following conditions:

  • the company is a Singapore tax resident for the immediate preceding YA;
  • there are no other changes to the economic circumstances of the company; and
  • the directors of the company have to attend the Board of Directors meeting held outside Singapore or if the meeting is held via electronic means (e.g. via video-conferencing, teleconferencing, etc.) due to the directors being temporarily restricted in their travel as a consequence of Covid-19.

Conversely, IRAS will consider a company as a non-resident for YA 2021 and/or YA 2022, provided it meets all the following conditions:

  • the company is not a Singapore tax resident for the immediate preceding YA;
  • there are no other changes to the economic circumstances of the company; and 
  • the company has to hold its Board of Directors meeting in Singapore due to the travel restrictions relating to Covid-19.

To support the claim that the company should continue to be treated as a tax resident or non-resident of Singapore, the company should keep relevant documentations and records (e.g. board minutes stating why the directors were attending board meetings from their respective locations), and to provide the relevant information to IRAS upon request. For information on how tax residence status of a company is determined, refer to Tax Residence Status of a Company.

PE under Singapore Income Tax Act 

Employees of a foreign company may have to remain in Singapore due to travel restrictions relating to COVID-19. IRAS will consider that such presence does not result in the creation of a PE in Singapore for the foreign company for YA 2021 and/or YA 2022, provided it meets all the following conditions: 

  • the foreign company does not have a PE in Singapore for the immediate preceding YA;
  • there are no other changes to the economic circumstances of the company; 
  • the presence of the employees in Singapore is due to travel restrictions relating to COVID-19 and their physical presence in Singapore up to 30 June 2021 is temporary; 
  • the activities performed by the employees during the presence would not have been performed in Singapore if not for the travel restrictions relating to COVID-19; and
  • these employees will leave Singapore as soon as they are able to do so, following the relaxation of travel restrictions relating to COVID-19.

To support the claim that there is no PE in Singapore, the company should keep relevant documentations and records, and to provide the relevant information to IRAS upon request.