Singapore taxes income gains. There is no capital gains tax in Singapore. Therefore, the items that will attract income taxes are listed in section 10(1) of the Income Tax Act 1947. The section is as such:

 

Charge of income tax

10(1) Income tax is, subject to the provisions of this Act, payable at the rate or rates specified hereinafter for each year of assessment upon the income of any person accruing in or derived from  Singapore or received in Singapore from outside Singapore in respect of —

a) gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised;

b) gains or profits from any employment;

c) [Deleted by Act 29 of 1965]

d) dividends, interest or discounts;

e)  any pension, charge or annuity;

f) rents, royalties, premiums and any other profits arising from property; and

g) any gains or profits of an income nature not falling within any of the preceding paragraphs.

 

It does not always mean that a gain from say a property or stocks will be deemed as capital gain. The determination is a highly fact specific inquiry. For example, in most cases, gains from the sale of a property will be deemed as capital gains and hence attract no tax. However, if a company trades property, then it can be deemed as gains from trade and hence taxable.

In the case of NP and another v Comptroller of Income Tax [2007] 4 SLR(R) 599, during an 8-year period between June 1988 and March 1996, a couple had bought 8 residential properties and sold 7 of them. IRAS decided that the gains from 4 of those properties were trade in nature and hence were subject to income tax. The couple appealed. 

The court looked at various factors. These were termed as badges of trade. They are:

(a) subject matter of realisation;
(b) length of period of ownership;
(c) supplementary work on or in connection with the property realised;
(d) circumstances that were responsible for the realisation;
(e) motive of the transaction; and
(f) method of financing.

The appeal was partially allowed. This meant that the court partially agreed with IRAS’ assessment that gains from certain properties out of the 4 properties were deemed as trade income and subject to income tax.

 

If you need advice on tax related matters, you may contact the Raffles Corporate Services tax advisory team at [email protected].

 

Yours sincerely,

The editorial team at Raffles Corporate Services