Tax residency is an important concept in Singapore, as it determines the tax obligations of individuals and companies. It is important to understand the difference between tax resident and non-tax resident of Singapore in order to ensure that you are compliant with the tax laws of the country. This article will explain the differences between tax resident and non-tax resident of Singapore, and how it affects a Private Limited Company.

What is a Tax Resident of Singapore?

A tax resident of Singapore is someone who has stayed in the country for more than 183 days in a calendar year and has either a permanent residence or an employment pass. Tax residency is a crucial factor when determining a person’s tax liabilities in Singapore. It also determines which tax treaty benefits a person is eligible for. Tax residents of Singapore are liable to pay taxes on their worldwide income, while non-residents are only liable to pay taxes on income sourced in Singapore. Additionally, tax residents are eligible for certain tax reliefs and deductions which non-residents are not. It is important to note that the 183-day rule is not the only factor that determines tax residency. Other factors such as the nature and purpose of the stay, the intention of the individual, and the residential ties that they have in Singapore are also taken into account.

What is a Non-Tax Resident of Singapore?

A Non-Tax Resident of Singapore is an individual who does not meet the criteria to be considered a tax resident. This means that they do not have to pay taxes on their income in Singapore. To be considered a Non-Tax Resident, one must not have a permanent place of residence in Singapore, must not have stayed in Singapore for more than 183 days in the calendar year, and must not work in Singapore for more than 183 days in the calendar year. Non-Tax Residents are only taxed on income sourced from Singapore, such as rental income, and any other income earned in Singapore. Non-Tax Residents are also not eligible for certain tax reliefs and deductions. It is important to note that a Non-Tax Resident does not need to pay taxes on any income earned outside of Singapore. So, if you are planning to stay in Singapore for less than 183 days in a calendar year, you may be considered a Non-Tax Resident and not have to pay taxes on your income. If you are still confused, engage a professional tax advisory firm in Singapore such as Morrison Management. They are better able to advise you on these matters and ensure you adhere to the regulations in the country. 

How Does it Affect a Private Limited Company?

The tax residency status of a Private Limited Company in Singapore will determine the tax obligations of the company. If the company is a tax resident of Singapore, it will be subject to Singapore’s progressive tax rates, which range from 0% to 22%. On the other hand, if the company is a non-tax resident of Singapore, it will be subject to Singapore’s flat tax rate of 17%.

Conclusion

Tax residency is an important concept in Singapore, as it determines the tax obligations of individuals and companies. It is important to understand the difference between tax resident and non-tax resident of Singapore in order to ensure that you are compliant with the tax laws of the country. This article has explained the differences between tax resident and non-tax resident of Singapore, and how it affects a Private Limited Company.