According to the general definition, capital gains tax is a tax that is levied on profit generated from the sales of asset in which the price is higher than its original purchase price. Note the clear difference between the asset’s sale price and its original purchase price.
📚 Start with the basic. Read our guide on Singapore corporate tax, corporate tax rate and how to file them.
No Capital Gains Tax in Singapore
In Singapore world of business, the sales of fixed assets, shares, gains on foreign exchange on capital transactions, and intangible assets are not taxable.
Capital gains can only be taxed in Singapore if you are either a trader or a dealer. What this means is that the gains can only be taxed if a person buys and sells a property with the purpose of making a profit.
Determining the Nature of Income and whether it is Trading in Capital Assets
There is currently no guide on how to determine whether something is considered as taxable trading income or tax-free capital gain. However, profits are always counted as earned income if they are the result of either trade or business activities in Singapore.
💰 How to make more profit? Learn 10 ways to increase your business profits.
The following is a list of considerations to help you determine whether or not the buying/selling of a property is of profit-making purpose:
- The frequency of buying and selling properties
- The purpose of buying or selling properties
- The financial means to hold a property for a long period of time
- The property holding period
❓ Is your business on the right track? Know the 3 financial elements your business must get right.
The Safe Harbour Rule
The main purpose of the Safe Harbour rule is to exempt the disposal of share disposal gains and equity investments from tax if the following requirements are fulfilled:
- The divesting company holds at least 20% of the total amount of shares for a period of at least 24 months before the disposal
- The divesting company holds at least 20% of the ordinary shares in the company whose shares are being disposed of
If the above-mentioned requirements are not met, the tax treatment of the gains/losses will be determined based on both the facts and the circumstances of the case in question.
📝 Planning your tax ahead can help you save money and time. Learn the tips of effective tax planning for companies in Singapore.
Summing up, having zero capital gains in Singapore has a big advantage because it encourages investment in the country. Zero capital gains have the ability to give share prices a boost, encourage entrepreneurship, and increase investment in Singapore. This makes it easier for anyone to start a business and register a company in the country.
