You will be able to explain how common investment returns are treated for income tax.
At a family lunch, Darren mentioned that he had made about S$3,000 selling an ETF he had held for five years, and asked Shu Ting whether he needed to declare it. Before she could answer, their uncle said Singapore taxes nothing on investments. Their aunt said she had once had to pay tax on share gains. Both of them were partly right, and that is the problem with investment tax in Singapore: the general rule is generous, and the exceptions are the parts people remember.
This lesson sorts the common investment returns into what is taxed in your hands and what isn't, for an individual investing in their own name.
Singapore companies pay dividends under the one-tier system. The company pays tax on its profits, and the dividends it pays out of those profits are exempt from tax in the hands of shareholders. So a dividend from a Singapore-resident company, credited to your CDP or brokerage account, doesn't go on your return at all.
Shu Ting's example dividends from SGX shares last year came to S$1,800. Under the one-tier system, none of that was taxable, and none of it appeared in her IRAS account.
Distributions from Singapore REITs are generally treated as exempt for individuals who hold the units as investments, too. The exception is if you receive them through a partnership or as part of a trade. IRAS sets out the treatment on its page about REIT distributions, and it is worth reading if REITs are a large part of your income.
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 fixed deposit interest of S$400 last year, an example figure, was exempt.
Returns on Singapore Government Securities, Treasury bills and Singapore Savings Bonds are also generally tax-free for individuals. MAS and IRAS explain the treatment on their websites.
The same exception applies here as for REITs. 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 make to a friend's company. If you aren't sure whether an interest payment is exempt, check the IRAS page on interest income before leaving it off your return.
Singapore has no capital gains tax as such. If you buy shares, units or bonds as a long-term investment and later sell them for more, the gain is generally not taxed.
The catch is the line between investing and trading. IRAS can treat gains as income if the way you buy and sell looks like a trade or business. It looks at the whole pattern, not one sale. The things it considers include how often you buy and sell, how long you hold, whether you borrow to buy, why you bought, and whether trading is close to what you do for a living. Someone who buys a world fund every month and holds for decades is investing. Someone who buys and sells the same counters several times a week with margin financing may be trading, and their gains may be taxable.
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.
Darren's S$3,000 came from a single sale of a fund he had bought monthly for five years. That pattern is a long way from trading, so the gain wasn't taxable. Their aunt's case, it turned out, had been different: years earlier, she had traded shares most days through a margin account.
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 comes through a partnership in Singapore, as module 6, Handle foreign income and moving countries, explains. The tax that matters for those dividends is usually the tax withheld abroad before they reach you. Investing in US and global markets from Singapore, lesson 3.1, Why 30% of a US dividend never reaches you, covers that withholding.
For most employees who invest in their own name, the result is short. One-tier dividends, deposit interest and gains from long-term investing usually don't go on the return, while 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 investment income for the year: one-tier dividends, deposit interest, a few US dividends, and a gain on an ETF she had sold to rebalance. She marked each one, wrote the rule beside it, and found nothing that needed declaring. She kept the list anyway, with the date she checked, in case anyone asked.
For the activity, list your own investment income from last year and mark each item as taxable, exempt or unsure.
List your investment income last year and mark each item as taxable, exempt or unsure.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).