Understanding the Certificate of Residence (COR) can make a significant difference when you're operating a business in Singapore. As an individual earning income in a foreign country, it's important to navigate the tax obligations that come with such earnings.
But did you know that as a tax resident of Singapore, the COR can make things a bit easier for you? The COR serves as your formal claim to tax residency. It potentially eases your tax burden through the Double Taxation Agreement (DTA) benefits that Singapore has negotiated with other countries.
For those who generate income from abroad, tax responsibilities in the corresponding foreign country may apply. Yet, with a Certificate of Residence, you can actively claim tax reliefs provided by DTAs. In other words, it affirms your position as a Singapore tax resident and prevents you from paying more tax than necessary.
This guide will take you step by step through everything you need to know about the COR. We'll talk about why it's important, who can get one, and how to apply for it. By the end of this, you'll understand how a Certificate of Residence can help your business save money on taxes in Singapore. Let's go through it together.
What is a Certificate of Residence?
The Inland Revenue Authority of Singapore (IRAS) issues a Certificate of Residence (COR) to businesses in Singapore to certify their tax residency status. The primary benefit of a COR is clear. It allows an entity to claim benefits. These benefits come under the Avoidance of Double Tax Agreements (DTAs).
A business becomes a tax resident in Singapore when its control and management take place within the country. However, if the control and management happen outside of Singapore, the business is considered a non-resident.
Benefits of a COR:
The benefits of obtaining a Certificate of Residence are numerous and can greatly impact your business's financial management. Some of the key benefits include:
- Double taxation relief: You can claim foreign tax credits and avoid paying taxes on the same income in multiple jurisdictions.
- Tax exemptions and reductions: Certain types of income or transactions may be eligible for tax exemptions or reductions under DTAs.
- Cross-border economic transactions: The Certificate of Residence enables you to leverage tax provisions related to business profits and pensions. It also applies to social security contributions and enhances benefits from cross-border economic transactions.
What is Double Taxation?
Companies can apply to declare themselves as Singaporean tax residents. This declaration allows them to be recognised and avoid double taxation. Non-resident companies in Singapore may also apply for this status. An Avoidance of Double Taxation Agreement (DTA) provides relief from double taxation. Therefore, this relief applies to income earned in one jurisdiction by residents of another jurisdiction, which is a treaty partner.
The DTA permits a reduction or exemption of tax on certain types of income. In some cases, a DTA may allow only a reduction, not a full exemption, of tax. In such cases, it offers relief for double taxation. It does this by letting the Singapore company claim credit. This credit is for the foreign tax paid. The company can use it against its Singapore tax due on the same income. This form of credit is known as Double Tax Relief (DTR).
Does My Company Need a Certificate of Residence?
Not all businesses in Singapore are required to obtain a Certificate of Residence. The need for a COR depends on several factors, including the nature of your business activities and your tax obligations in foreign countries.
If you earn foreign income, you may be subject to tax in that foreign country/region. However, if there is a DTA between Singapore and the foreign country/region, you may be able to claim tax benefits in the form of reduction or exemption of tax.
If you're not claiming benefits under the DTA but need a letter certifying tax residency, you have an option. Write to IRAS to make your request. Be sure to include the following information:
- Name and Unique Entity Number (UEN) of the company
- Reason(s) for requesting the letter of residence
- Confirmation that the control and management of the company is exercised in Singapore
- Calendar year for which the letter is required
How to Apply for a Certificate of Residence
To apply for a COR, your application must be e-filed through myTax Portal. Unless your company falls under one of the following specific circumstances as paper applications are no longer accepted:
- Applying COR for a sole-proprietorship business owned by the company
- Applying COR for a partnership business of which the company is a partner
- Non-Singapore incorporate companies
When applying, it is possible to apply for the current calendar year, one future calendar year, or even up to four previous calendar years. When preparing to apply, the company will need to authorise a staff member or a third party (such as a tax agent) for Corporate Tax (Filing and Applications) in Corppass before the staff member / third party can log in and apply for COR on behalf of the company. IRAS will process your application within 7 working days of receiving the application.
Importance of the Certificate of Residence (COR) for businesses in Singapore
In conclusion, a Certificate of Residence (COR) is an essential document for businesses in Singapore that engage in cross-border transactions or wish to claim tax benefits under double tax agreements. Thus, it establishes your business's tax residency status and provides evidence to support your tax claims in Singapore and foreign countries.
By obtaining a COR, your business can enjoy reduced withholding tax rates, simplify tax reporting obligations, enhance credibility, and unlock international business opportunities. It is also crucial to understand whether your business needs a COR and to follow the necessary steps and guidelines for a successful application.
Reach Out to Grof!
Navigating the Certificate of Residence (COR) application process can be complex, but with Grof, it doesn't have to be. Our expert team makes securing a COR straightforward and stress-free. We pride ourselves on an application process that's as smooth and efficient as can be, ensuring that you're free to focus on what you do best—running your business.
In addition to handling COR, we offer a comprehensive suite of corporate secretarial solutions. Our budget-friendly corporate secretarial services offer a seamless application process for the Certificate of Residence (COR), designed to align with the unique demands of your business. The task of keeping up with Singapore's business regulations may seem overwhelming, especially when your company is in its growth phase.
But worry not—our seasoned professionals are on hand to provide essential insights and support, guiding you through every step and helping to secure the prosperous future your business deserves.
Get in touch with us today for any questions related to COR or other services we provide.
