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There are tax implications connected to the classification of a foreign entity for income tax purposes. For instance, depending on whether a foreign entity is a company or a partnership for Singapore income tax purposes, tax may either be imposed on the entity or on the entity’s owners.

IRAS generally applies a resemblance approach to determine the classification of a foreign entity for Singapore income tax purposes. Under the resemblance approach, the similarities and differences between a foreign entity and its corresponding Singapore entity are examined before deciding on the tax classification. This maintains parity in the treatment of Singapore and foreign entities with similar features. For example, for a foreign entity to be treated as a “company”, the entity is expected to be in substance similar to a company incorporated under the Companies Act 1967.

Resemblance approach: Factors for determining whether a foreign entity is a company or a partnership

To determine if a foreign entity is to be treated as a company or a partnership, a set of factors will be applied. The foreign entity must meet all factors indicated to be considered as a company or a partnership for Singapore income tax purposes.

Factors for a foreign entity to be considered a company:

1.The entity is incorporated or registered under any law in force in its home jurisdiction.
2.The entity has a legal personality separate from its members and directors/ managers.
  • Having a separate legal personality implies that the members of an entity are not personally liable for the debts and losses of the entity.
3.The entity maintains a share capital (or accepts undertakings from its members to contribute to the assets of the entity in the event of it being wound up, i.e. members' guarantees).
  • An entity's share capital refers to the amount raised through the issuance of shares.
4.The entity has at least one member and is managed by a board of directors/ managers, which may or may not comprise its members.
5.The entity has perpetual succession until wound up or struck off.
6.Except for an entity limited by guarantee, members are entitled to share in the entity's profits, if so decided and declared by the entity.
  • Members do not have an unconditional right to receive dividends. Typically, the board of directors of the entity would decide on when and the amount of dividends to be paid.

Factors for a foreign entity to be considered a partnership:

1.The entity is formed or registered under any law in force in its home jurisdiction.
2.The entity has at least two members.
3.Members are entitled to share in the entity's profits as the profits arise.
  • Unlike a company, no resolution is required for the distribution of partnership profits. The profits are attributed to members.
4.The entity does not have share capital.
  • The concept of shares does not apply to partnerships.
5.Except for limited liability partnership, the entity does not have a legal personality separate from its members.

Where a foreign entity does not meet all the factors as a company or a partnership, IRAS will consider all relevant factors such as how the entity is classified for tax purposes in its home jurisdiction and the considerations behind the classification, in determining the classification of the entity for Singapore income tax purposes.

Once an assessment has been made for a certain foreign entity structure, IRAS will generally apply the same treatment for that particular foreign entity structure as long as the structure remains substantially the same.

Classification of certain foreign entity structures

Please refer to the list of certain foreign entity structures and their classifications (PDF, 97KB). The list provides IRAS’ position on whether the foreign entity structures are regarded as companies or partnerships for Singapore income tax purposes.

Please note that the list may be updated depending on factors such as changes in the relevant foreign law or the agreement governing the entity’s creation.