What is Tax Residence

TAX RESIDENCE TEST

For individuals, resident means “a person who, in the year preceding the year of assessment, resides in Singapore except for such temporary absences there from as may be reasonable and not inconsistent with a claim by such person to be resident in Singapore, and includes a person who is physically present or who exercises an employment (other than as a director of a company) in Singapore for 183 days or more during the year preceding the year of assessment”. See definition of “Resident of Singapore” in section 2(1) of the Income Tax Act.

Generally, there is a qualitative test and two quantitative tests (physical presence test and employment test), embodied in the definition of “resident”. Fulfilment of any of these would be sufficient to establish an individual as a resident. The qualitative test depends on the meaning of the words “resides” and “temporary absence”.

For of a company or a body of persons, “resident” means one which the control and management of whose business is exercised in Singapore. In NB v. Comptroller of Income Tax [2006] SGITBR 2, the Singapore Income Tax Board of Review (ITBR) took the view that the statutory “control and management” test is no different from that of the common law.

If there is more than one decision-making body in a company, the management and control of the business of that company lies with that body holding the paramount authority on major questions of policy.

The residence of a company is to be determined by its actual place of management, based on the actual circumstances of the company and not through the interpretation of the constitution or by-laws of the company. The management and control of a company generally lies with its board of directors.

Other than for the purpose of determining the applicable tax rates, the tax residency of a taxpayer is also important as certain types of exemptions are applicable depending on whether the taxpayer is resident in Singapore or not.

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