Singapore: Tax treatment of Singapore citizens and permanent residents working remotely (COVID-19)

Remote work arrangements in Singapore extending beyond 30 June 2021

Tax treatment of Singapore citizens and permanent residents working remotely

The Inland Revenue Authority of Singapore (IRAS) has become increasingly stringent in granting a tax exemption for employment income relating to work performed remotely in Singapore on behalf of overseas employers—given that the coronavirus (COVID-19) pandemic has made remote-working a new norm for the global workforce.

As COVID-19-related tax relief comes to an end, the IRAS will from 1 July 2021 allow tax concessions based on a case-by-case review of an individual’s circumstances.

  • For Singaporeans or Singapore permanent residents who have been exercising employment overseas but worked remotely from Singapore in 2020 because of COVID-19, the IRAS is prepared to treat these individuals as not exercising employment in Singapore through 30 June 2021, provided certain conditions are satisfied.
  • If the Singaporean or Singapore permanent resident’s remote-working arrangement in Singapore extends beyond 30 June 2021, the income relating to remote work from 1 July 2021 (assuming income up to 30 June 2021 qualifies for exemption from tax) will be subject to tax in Singapore. However, the IRAS will consider extending the tax exemption on the income on a case-by-case basis if certain circumstances are satisfied.

There are also implications for required contributions to a central provident fund.

What does this mean from a corporate tax perspective?

The tax concessions in relation to a company’s tax residence status and permanent establishment (PE) remain in place for Year of Assessment (YA) 2022, subject to certain relevant conditions.

  • From a tax residence perspective, this means that companies with directors based overseas may still be considered tax residents in Singapore even if they are not able to hold board meetings in Singapore due to travel restrictions.
  • From a PE perspective, employees of a foreign company who remain in Singapore due to travel restrictions may not result in the creation of a PE in Singapore for the foreign company.

While these tax concessions extend to cover YA 2022 (financial years ending in 2021), cross-border remote-working arrangements may result in corporate tax consequences for the employer if such arrangements become a permanent feature after travel restrictions ease.

Read an August 2021 report [PDF 337 KB] prepared by the KPMG member firm in Singapore

 

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