You will be able to explain how common investment returns are treated for income tax.
At a family lunch, Darren says he made about S$3,000 (an example figure) selling an ETF he had bought every month for five years, and asks his sister Shu Ting whether he has to declare it. Before she can answer, their uncle says Singapore taxes nothing on investments, and their aunt says she once had to pay tax on share gains.
Both of them are partly right. Singapore's general rule on investment tax is generous, and people tend to remember the exceptions. What follows applies to individuals investing in their own name only.
Singapore companies pay dividends under the one-tier system. The company pays tax on its profits, and dividends paid out of those profits are tax-exempt for shareholders. A dividend from a Singapore-resident company credited to your CDP or brokerage account does not go on your tax return at all, and one-tier dividends do not appear in your IRAS account. Shu Ting received S$1,800 in dividends from SGX shares last year. None of it was taxable, and none of it showed up in her IRAS account.
Distributions from Singapore REITs are generally exempt for individuals who hold the units as investments. The exception is distributions received through a partnership or as part of a trade, which can be taxable. If REITs are a large part of your income, IRAS has a page on REIT distributions that is worth reading.
Interest from deposits with approved banks and licensed finance companies in Singapore is generally exempt for individuals. That covers savings accounts and fixed deposits at the banks most people use. Shu Ting's S$400 of fixed deposit interest last year (an example figure) was exempt.
Returns on Singapore Government Securities, Treasury bills and Singapore Savings Bonds are generally tax-free for individuals as well. MAS and IRAS explain the treatment on their websites.
Interest received through a partnership or as part of a business can be taxable. So can interest from sources outside these categories, such as a loan you made to a friend's company. If you are unsure whether an interest payment is exempt, check the IRAS page on interest income before you leave it off your return.
Singapore has no capital gains tax as such. Gains from selling shares, units or bonds you bought as a long-term investment are generally not taxed. The caveat is that IRAS can treat gains as income if your buying and selling looks like a trade or business. This is what is meant by trading, as opposed to investing, and gains from trading may be taxed as income.
IRAS looks at the whole pattern of your activity rather than a single sale. The criteria it lists include how often you buy and sell, your reasons for buying and selling, whether you have the financial means to hold for the long term, and how long you hold. Someone who buys a world fund every month and holds it for decades is investing. Someone who buys and sells the same counters several times a week using margin financing may find their gains are taxable.
Darren's gain came from one sale of a fund he had bought monthly for five years. That pattern is far from trading, so his gain was not taxable. Their aunt's case was different: years earlier she traded shares most days through a margin account, which is why her gains were taxed.
The same reasoning applies to other assets, including property bought to resell quickly and digital tokens. IRAS sets out its approach to each on its website.
Dividends from US companies and other overseas investments are foreign-sourced income. For individuals, foreign-sourced income received in Singapore is generally exempt, unless it is received through a partnership in Singapore. Module 6, "Handle foreign income and moving countries", explains the exemption and the partnership exception in detail.
For foreign dividends, the tax that usually matters is the tax withheld abroad before the money reaches you. Lesson 3.1, "Why 30% of a US dividend never reaches you", in the course "Investing in US and global markets from Singapore", covers this for US dividends.
For most employees investing in their own name, one-tier dividends, deposit interest and gains from long-term investing usually do not go on the return, and foreign dividends are generally exempt. The things to watch are any trading pattern, anything received through a partnership, and interest from unusual sources.
Shu Ting went through her own year this way. Her investment income was one-tier dividends, deposit interest, a few US dividends and a gain on an ETF she sold to rebalance. She marked each item, wrote the rule beside it, found nothing to declare, and kept the list with the date she checked in case anyone asked.
To sort yours:
List all your investment income for the year. Identify the type of each item: one-tier dividend, REIT distribution, deposit interest, government securities, T-bill or SSB return, sale gain, or foreign dividend. Mark each as taxable, exempt or unsure, and write the rule that applies beside it. Check for exceptions: a trading pattern, income received through a partnership or as part of a trade or business, and interest from unusual sources. For anything still unsure, check the relevant IRAS page before leaving it off your return. Keep the list with the date you checked, in case anyone asks.
For the activity, list your own investment income from last year and mark each item as taxable, exempt or unsure.
Write down every piece of investment income you received last year and mark each one taxable, exempt or unsure.
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