Is There a Capital Gains Tax in Singapore?

Singapore does not have a capital gains tax. This means that profits from the sale of capital assets, such as property, shares, or other investments, are not subject to taxation. This policy applies to both individuals and companies.

However, the tax treatment of a gain depends on whether it is classified as a capital gain or as income. If the authorities determine that a gain is income, it becomes taxable.

The Distinction Between Capital Gains and Income

A capital gain is the profit earned from the sale of an asset held for long-term investment purposes. For instance, selling a building that a company has owned and used for its operations for many years would result in a capital gain.

Conversely, income is defined as profits generated from carrying on a trade or business, including gains from regular commercial operations. The Inland Revenue Authority of Singapore (IRAS) scrutinizes the transaction to make this determination. If an asset is bought with the intention of reselling it for a short-term profit, the gain is treated as income.

Singapore’s tax system is territorial, meaning only income sourced in the country is taxed. Foreign-sourced income is taxed only when it is remitted to Singapore.

Determining if a Gain is Taxable Income

To differentiate between a capital gain and taxable income, the IRAS uses criteria known as the “badges of trade.” These are a collection of factors that, when viewed together, indicate the seller’s intentions. No single badge is conclusive, as the IRAS assesses the overall pattern of transactions to determine if a trade is being conducted.

The primary factors are:

• The motive for the transaction, especially if an asset was acquired with the intention of resale at a profit.
• The length of the ownership period, as a short holding period suggests a trading motive.
• The frequency of similar transactions, which can indicate a business is being operated.
• Whether any work was done to the asset to make it more marketable, such as property renovations.

Application to Specific Asset Classes

The application of the “badges of trade” is seen in real estate and shares. For property, the sale of a family home lived in for many years is considered a capital transaction. In contrast, an individual who buys multiple properties, performs renovations, and quickly sells them would be considered to be trading, making the profits taxable income.

For shares and securities, a long-term investor holding a portfolio for capital appreciation will not be taxed on gains from selling those shares. However, a person engaged in high-volume, frequent trading of shares would have their gains classified as taxable income from a business.

A “safe harbour” rule provides certainty for companies selling shares. This permanent rule exempts gains from the disposal of ordinary shares from tax if the divesting company has held at least 20% of the shares in the other company for a continuous 24 months. Starting in 2026, this rule will expand to cover certain preference shares and allow the ownership threshold to be met on a group basis. If these conditions are not met, the IRAS will use the “badges of trade” to determine the tax treatment.

Taxation of Gains Deemed as Income

When a gain is determined to be income, the profit is added to the statutory income of the individual or company for that assessment year. The gain is not subject to a special tax rate but is combined with other income sources.

The total chargeable income is then taxed at the prevailing rates. For corporations, this is a flat rate of 17%. For individuals, Singapore uses a progressive tax system with resident tax rates ranging from 0% to 24%.

A taxable gain must be declared on the income tax return under “Other Income.” Failure to declare this income can result in penalties.