Tax Residency Criteria in Singapore
In Singapore, the determination of tax residency for individuals and entities is governed by the Income Tax Act (ITA). According to the ITA, an individual is considered a tax resident if they meet any of the following criteria:
- Physical presence in Singapore for more than 183 days in a calendar year.
- Maintenance of a permanent home in Singapore.
- Employment in Singapore for more than 183 days in a calendar year.
- Carrying out a trade, business, profession, or vocation in Singapore.
For entities, tax residency is determined based on the place of incorporation or management and control. A company is considered a tax resident if it is incorporated in Singapore or if its management and control is exercised in Singapore.
Impact of International Tax Treaties
Singapore has entered into numerous tax treaties with other countries to prevent double taxation and promote cross-border trade and investment. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
One key provision in Singapore's tax treaties is the "tie-breaker" rule. This rule is used to determine the tax residency of an individual who is considered a resident of both Singapore and another country under their respective domestic laws. The tie-breaker rule typically considers factors such as the individual's permanent home, center of vital interests, and habitual abode.
For example, the Singapore-United States tax treaty provides that an individual who is considered a resident of both Singapore and the United States under their respective domestic laws will be deemed a resident of the country where they have their permanent home. If the individual has a permanent home in both countries, they will be deemed a resident of the country where they have their center of vital interests.
Conclusion
The criteria for determining tax residency in Singapore are designed to ensure that individuals and entities with significant ties to the country are subject to taxation on their worldwide income. International tax treaties may modify or provide exceptions to these criteria, but the underlying principles remain the same. By establishing clear rules for tax residency, Singapore aims to prevent double taxation and promote cross-border economic activities.
If delving into the depths of Singaporean tax rules and regulations isn't your style, and you'd rather have experts take the reins, then Heavnn is here to help.
Let us simplify your tax planning journey. Access Heavnn's blend of professional expertise and cutting-edge technology by clicking the button below.
