Corporate Tax Guide: Capital Gains Tax (CGT) in Singapore

Apart from corporate income tax, many businesses across the globe pay what is called “Capital Gains Tax”. It is, in fact, one of the major forms of corporate tax - particularly for businesses that frequently acquire and dispose of capital assets 

In Singapore, however, the rules are different. The Inland Revenue Authority of Singapore (IRAS) has special reservations for CGT. 

As such, this article dives deep into the details to give you a good idea of what you should expect when it comes to CGT in Singapore. And to start us off, what exactly is capital gains tax in the first place? 

What is Capital Gains Tax in Singapore?

Capital gains tax in Singapore generally refers to the tax that authorities impose on the profits you make after selling capital assets at a price that happens to be higher than the original buying price. 

For instance - if your business acquires a fixed asset for S$100,000 and later sells it for S$150,000, CGT might be applied on the S$50,000 profit. 

Other forms of assets whose sales are usually accompanied by capital gains tax in Singapore include - foreign exchange, digital assets, and shares. 

Does Singapore Have Capital Gains Tax?

Thankfully, Singapore doesn't charge its businesses CGT. That means you're free to sell your company's capital assets without worrying about paying taxes on the profits that you end up making. 

This applies to fixed assets such as property, intangible assets like copyrights, public and privately-traded shares, plus capital transactions that attract foreign exchange gains. 

But, get this - such benefits don't come automatically with every asset transaction. Although the government of Singapore is yet to come up with a formal capital gains guide, the IRAS has its rules for separating capital gains from other forms of business profit. 

Therefore, whether you end up paying taxes or not depends on how the IRAS categorizes the profits. If they're found to be capital account-related, your company will go scot-free without tax charges. But, if the IRAS reviews the circumstances and establishes that the profits were generated as part of your business revenue, you'll be required to pay a corporate income tax rate of 17%. 

Consider, for instance, a company that deals in real estate property. The proceeds it makes from the property sales will not be regarded as capital gains. Instead, the IRAS will treat the gains as revenue, since they come directly from the company's primary business activities. 

All in all, when it comes to property sales, some of the critical factors that are taken into consideration are:

• The holding period of the asset, usually from the day it was acquired to the day it was sold. 
• The reasons for purchasing and selling the asset. 
• The frequency of purchasing and selling properties. 

What is the Safe Harbour Rule?

As for the capital gains involving ordinary shares and equity investments, you might want to take into account the Safe Harbour Rule. 

This legislation removes all tax obligations from any disposals of equity investments and ordinary shares that occur between the 1st of June 2012 and the 31st of May 2022. You just have to ensure that the transaction meets the following conditions: 

• The divesting company owns a minimum of 20% of the ordinary shares in the disposing company. 
• The divesting company maintains a minimum of 20% share ownership for not less than 24 months before the disposal. 

Capital Gains Tax Singapore: What’s Next

For additional assistance in managing not only your capital gain taxes but also other corporate taxes in Singapore, feel free to reach out to us. Just book a free consultation and we’ll help you plan and file all your income taxes in Singapore.