Singapore Corporate Tax season 2020 is now underway and companies are required to e-file their Corporate Income Tax Returns for YA2020 before 15 December 2020. All Singapore Companies are required to file annual income tax returns online to the Inland Revenue Authority of Singapore (IRAS) and pay income tax at the prevailing Singapore corporate tax rate charged on chargeable income. 

Words Tax Guide Singapore Corporate Capital Gains Tax against background of two asian employees discussing in an office. Accounting documents and a model house on a desk.

Singapore has maintained its Global Business Complexity Ranking and remains among the top 20 easiest countries to do business in, despite complications brought by the COVID-19 pandemic. The country’s strong tax and accounting standards as well as Singapore’s competitive tax rates at 17% of chargeable income makes it an attractive business destination. The local government has also announced a slew of tax reliefs and schemes on top of the annual budget announcement to help companies and small businesses tide through the economic uncertainty brought by the pandemic.

Singapore Capital Gains Tax (CGT)

Capital Gains Tax (CGT) is a tax levied on the profit for the sale of property, such as shares, real estate or any form of assets. For Singapore companies, capital gains are not taxable except in certain cases where IRAS deems the trading of properties was done for profit. For further information on non-taxable capital gains in Singapore see our Capital Gain Tax guide.

When Do Companies Pay Capital Gains Tax in Singapore?

Capital gains may be taxable if the corporate entity buys and sells property with a profit-seeking motive, or the company is deemed to be trading in properties. Even if the assets do not fall under the inventory of your normal business activities, gains on the sale of said assets may be subject to capital gains tax based on the following criteria put forth by IRAS:

  1. Holding Period – If a company bought a bungalow and subsequently sold it within 6 months for a profit, this may be deemed as a short term profit-seeking motive and thus be taxed accordingly.
  2. Frequency of transactions – If a company made 5 purchases and sold 3 during the year, profits gained would be subject to capital gains tax due to high frequency of transactions. 
  3. Motive – Motive of purchase depends on whether an asset was used for its intended purpose. If an office property was bought and was not utilised as a front office or kept vacant, profits from sale several years later may indicate a motive for profit and be taxed accordingly as CGT.
  4. Enhancement work performed – If a company made substantial renovation work and sold the property for gain, there is motive for profit and any gains may be subject to CGT.
  5. Background or reason for sale – IRAS will also assess the scenario which led to the sale of assets. Compulsory acquisition by government or forced liquidation due to business deterioration which led to the gain on sale of assets will not require companies to suffer any CGT.
  6. Companies selling shares in another company would not incur CGT under the Safe Harbour Rule. This means the company must have held more than 20% of all shares outstanding and for a holding period of more than 24 months. Any form of sale not meeting the above 2 conditions will be scrutinised by IRAS using the badges of trade criteria.

This corporate tax season, it is a good option to seek the assistance of a tax professional to ensure Singapore companies enjoy the maximum benefits of IRAS tax incentives and remain in full compliance with the local tax legislation. 

PWCO is a qualified tax professional services firm with over 30 years of experience in the industry. Our qualified tax experts have in-depth knowledge of available corporate incentives, rebates, reliefs and schemes to help Singapore businesses and companies maximise their tax savings and improve their cash flow. 

 

Esther Mok
Tax Principal , Paul Wan & Co.
Esther Mok is a Fellow member of The Association of International Accountants, UK and an Approved Accredited Tax Advisor specializing in both Income Tax and GST with Singapore Institute of Accredited Tax Professionals (SIATP). She has behind her more than 20 years of tax experience dealing with international and local clients.
em@pwco.com.sg
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Esther Mok
Tax Principal , Paul Wan & Co.
Esther Mok is a Fellow member of The Association of International Accountants, UK and an Approved Accredited Tax Advisor specializing in both Income Tax and GST with Singapore Institute of Accredited Tax Professionals (SIATP). She has behind her more than 20 years of tax experience dealing with international and local clients.
em@pwco.com.sg
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