IRAS updated its guidance to “relieve” conditions to apply for Singapore tax resident and fine-adjust PE definition

The Inland Revenue Authority of Singapore (“IRAS”) has updated its COVID-19 Support Measures and Tax Guidance in January 2021 to provide its view on the conditions for fulfilling tax resident status and PE related matters due to the influence of COVID-19.

The IRAS proposes to relieve the requirement of board of directors’ meetings in Singapore for application of Singapore tax resident due to the travel restrictions for the years 2021 and 2022. The relief is subject to conditions[1] specified by the IRAS, as listed below:

  • the company is a Singapore tax resident for the immediate preceding year ;
  • there are no other changes to the known economic substance in Singapore ; and
  • the directors have to attend the Board of Directors meeting held outside Singapore or via electronic means.

The IRAS also proposes to relieve the conditions to constitute a PE in Singapore with the following
explicit measures:

  • presence of a foreign company’s employees in Singapore would not constitute a PE due to travel restrictions of COVID-19 for the years 2021 and 2022 ; and
  • the IRAS would stop to count the days during the lock-down period from 7 April 2020 to 6 August 2020 for determination of construction PE (e.g., building sites) where operations are suspended as a public health measure.

Points to Note

It is welcome that the IRAS has provided clear guidance and tax relief for determination of tax resident status and PE definition under special circumstance of COVID-19. On the contrary, in Hong Kong, taxpayers are yet to receive any clarification from the IRD on its views towards similar issues when they are approving applications of certificate of tax resident status. Given the stringent attitude of the IRD in reviewing the application in recent years, the chance of proposing similar “relief” in granting Hong Kong tax resident status remains low.

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