Singapore’s capital gains tax

By JoshuaOng Bot | February 15, 2023 |

Capital gain refers to the fact that the price of assets sold is higher than the price of assets purchased, resulting in spread income, that is, asset appreciation. Capital gains tax is a tax levied on the profits from the sale of capital assets. Simply put, it is to tax the spread income earned by investors in real estate sales.

Singapore has no capital gains tax.

The tax rate of capital gains tax varies from country to country. However, only a few countries have not levied capital gains tax, and Singapore is one of them. Singapore does not tax the income from the sale of stocks, fixed assets, intangible assets and foreign exchange gains from capital transactions. Only the capital gains of traders or distributors will be taxed. For example, when a person buys and sells real estate for profit, his income must be taxed.

How to identify the nature of capital asset transaction income?

Although there is no guide to clearly explain the characteristics of this kind of income (whether it is regarded as tax-free capital gains or taxable transaction income), according to the definition of the Inland Revenue Authority of Singapore (IRAS), if the profit comes from Singapore’s trade or business activities, it will be taxed as income.

All in all, the absence of capital gains tax is a great strategic advantage of Singapore and an important factor to attract entrepreneurs to invest in the country. Higher capital gains tax will make cash flow out of the investment cycle, while lower or no capital gains tax will be counterproductive. Moreover, zero capital gains tax is a company that can promote the rise of stock price, increase investment and attract entrepreneurs to register in Singapore.

“Safe Harbor Rules”

The “Safe Harbor Rule” applies to the sale of common shares from June 1st, 2012 to May 31st, 2022. If the following conditions are met, the income from the sale of equity investment and stocks can be exempted from tax:

Deprive the company of at least 20% of its common shares (that is, shares sold)
The divestiture company holds at least 20% equity for 24 months before the sale.

If the conditions are not met, the gains/losses from the sale of stocks will be taxed according to personal facts and circumstances.

Singapore dividend tax

What is a dividend?

Dividend refers to the share of retained earnings distributed to shareholders by the joint-stock company.

Dividend is a part of the income that only shareholders invest in the joint-stock company (the other part is capital gain), which is the reward paid to capital. In this regard, the newly added tax is not levied on dividends.

Since 1st January 2008, Singapore shareholders no longer have to pay taxes on dividends paid by Singapore resident companies under the single-tier company tax system.

Dividends in Singapore are defined as the profits obtained by shareholders from their ownership shares in the company, which can be paid in two ways-cash or in kind.

According to Singapore’s dividend tax system, Singapore dividends accumulated within one year will be declared as payables.

Taxable dividend	Non-taxable dividend
Income obtained through profit sharing of real estate investment trust (REIT). If the income comes from the partnership of Singapore companies or the trade, business or industry in REIT, it will be regarded as a taxable Singapore dividend.	Any Singapore dividends paid by Singapore resident companies on or after 1st January 2008 according to the single-tier company tax system, excluding Singapore dividends paid by cooperatives.
Singapore dividend paid by any cooperative	Income from profit sharing of real estate investment trust (REIT), excluding income from Singapore partnership or trade, business or industry in REIT.
Income from foreign countries through Singapore partnerships, although there are provisions applicable to such income.	Any foreign dividends received by individuals in Singapore on or after 1st January 2004. Singapore dividends are exempt from tax if certain conditions are met.

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