Impact of Covid-19 on personal income tax and permanent establishments in Singapore (Part 2)

The Covid-19 pandemic has resulted in unprecedented disruptions across multiple countries and economies in the world. In addition to adversely affecting the world economy, the restrictions placed on travel could have personal income tax implications for individuals and permanent establishment risks for businesses.  

This article provides an insight into the tax considerations in respect of the current crises with focus on the Singaporean personal income tax regime and the possible creation of permanent establishment risk.

Permanent Establishment considerations 

The Covid-19 pandemic has forced many workers to perform their work obligations in countries other than their country of employment. This has created potential permanent establishment (PE) risks according to the laws of many jurisdictions. 

The extended period of presence of staff in Singapore of a non-resident Company may lead to a PE exposure in Singapore, eg by:

  • Creating or having a fixed place in Singapore where a business is wholly or partly being carried on;
  • Carrying out supervisory activities linked to the building site or construction, installation or assembly project, or
  • Having staff in Singapore to act on behalf of the Company and who may have regularly exercised the authority to negotiate and conclude contracts on behalf of the Company.

However, due to Covid-19 travel restrictions, employees of a foreign company may have to remain in Singapore. IRAS will consider that such presence may not lead to the creation of a permanent establishment in Singapore for the foreign company for YA 2021 and/or YA 2022, provided it meets all the following conditions:

  • The foreign company does not have a permanent establishment in Singapore for the immediate preceding fiscal year (Year of Assessment);
  • There are no other changes to the economic circumstances of the company; 
  • The presence of the employees in Singapore is due to travel restrictions relating to Covid-19 and their physical presence in Singapore up to 30 June 2021 is temporary; 
  • The activities performed by the employees during the presence would not have been performed in Singapore if not for the travel restrictions relating to Covid-19; and
  • These employees will depart Singapore as soon as they are able to do so, following the ease of travel restrictions relating to Covid-19.


Tax authorities in various jurisdictions are coming up with guidelines on how to specifically address these abnormalities posed by the pandemic. Meanwhile, the local legislation and the suggestions of the OECD are useful references in the meantime. The OECD publication “Analysis of Tax Treaties and the Impact of the Covid-19 Crisis” which serves as a guideline is considered as a ‘soft law’ because it is not binding but could assist to support arguments in-country with the tax authorities. 

There is an increasing likelihood of businesses dealing with several cross-border employee related tax issues in the post Covid-19 period. Preparing the relevant records and documentation will help to support claims in the event of a dispute, or upon request. This will become more critical in the months ahead especially as the resurgence of cases causes more disruptions around the world.