How to Determine Whether Your Income is Taxable
Generally, income accrued in or derived from Singapore or received from outside Singapore is taxable. Learn more through our e-Learning video on the taxability of income.
What Is Taxable
Your company has to pay tax in Singapore on taxable income that is:
- Accrued in or derived from Singapore; or
- Received in Singapore from outside Singapore.
For example, the income from a business carried on in Singapore is regarded as accrued in or derived from Singapore.
For Singapore tax purposes, taxable income refers to:
- Gains or profits from any trade or business
- Income from investment such as dividends, interest and rental
- Royalties, premiums and any other profits from property
- Other gains that are revenue in nature
Income Received in Singapore from Outside Singapore
Under Section 10(25) of the Income Tax Act 1947, income from outside Singapore is considered received in Singapore when it is:
- Remitted to, transmitted or brought into Singapore;
- Used to satisfy any debt incurred in respect of a trade or business carried on in Singapore; or
- Used to purchase any movable property (such as equipment, raw material, etc.) brought into Singapore.
Section 10(25) is applied to tax foreign income received in Singapore only if the income belongs to an individual* who is resident in Singapore or an entity that is located in Singapore.
Non-resident individuals and foreign businesses that are not operating in or from Singapore can remit their foreign income to Singapore without being taxed on the income.
As an administrative concession, foreign income that is reinvested overseas without being repatriated to Singapore is not considered received in Singapore at the point of reinvestment. This means that the taxation of the foreign income is deferred until the investment is sold and the proceeds are brought into Singapore.
If the foreign-sourced income is subject to tax in Singapore and overseas, tax reliefs may be available to alleviate the double taxation suffered. Learn more about tax reliefs on foreign income.
* All foreign-sourced income received in Singapore by resident individuals, except those received through a Singapore partnership, is exempt from tax where the Comptroller of Income Tax is satisfied that the exemption is beneficial to them.
What Is Not Taxable
Capital gains are not taxable. These include:
- Gains on sale of fixed assets
- Gains on foreign exchange on capital transactions
Income Exempted from Tax
Certain types of income are specifically exempted from tax under the Income Tax Act 1947, subject to conditions. These include:
Determining the Existence of Trade
The word ‘trade’ is not defined in the Income Tax Act 1947. Whether a trade is being carried on is a question of fact. In determining whether a trade exists, certain factors are taken into consideration.
All the factors are taken into consideration when determining whether a trade exists, and no single factor is conclusive.
1. Nature of Subject Matter
This refers to the nature of the asset/ property that is bought and then sold. Some assets (e.g. commodities, manufactured items) are normally regarded as the subject of trading while others, when not bought in quantity, are less likely to be regarded as trading (e.g. antiques, art work).
2. Length of Ownership
This refers to the holding period of the asset/ property in question. The shorter the holding period, the more likely it is regarded as held for trading.
3. Frequency of Transactions
A high frequency of similar transactions is more indicative of trading than an isolated transaction.
4. Supplementary Work
This refers to additional work done on the asset/ property in question to make it more marketable or extra effort made to find or attract purchasers. If this is done, it is more likely that the subsequent disposal is regarded as trading.
5. Circumstances of the Realisation
Some circumstances are less likely to be indicative of trading (e.g. company is forced to sell the property in question due to compulsory acquisition, sudden urgent need of cash or threat of foreclosure by creditors).
This refers to whether there was an intention to trade at the time of the acquisition of the asset/ property in question.
7. Mode of Financing
This refers to how the purchase of the asset/ property in question is financed. Short-term financing is more indicative of trading than long-term financing. The company's financial position and ability to hold on to the property is also taken into consideration.
8. Other Factors
Other factors include whether there were any feasibility studies conducted, the accounting treatment adopted by the company, the availability of documentation or other evidence maintained by the company to indicate its intention.
What is Taxable
My company received donations. Are the donations taxable? Are expenses incurred to generate the donations tax-deductible?
If the donations are not voluntary gifts and are paid in return for benefits granted by the receiving organisation, they are business receipts and constitute income that is taxable in the hands of the recipient.
Expenses incurred to generate these taxable receipts are deductible if they are wholly and exclusively incurred in the production of income, revenue in nature and not prohibited from deduction under the Income Tax Act 1947.
Learn more about the deductibility of expenses.
Is income distribution from Real Estate Investment Trusts (REITs) taxable?
The nature, tax treatment and applicable period/ Year of Assessment (YA) of each REIT distribution are reflected in the Annual Distribution Statement issued by the Central Depository Pte Ltd (CDP).
A REIT distribution is taxable in the relevant YA as reflected in the CDP statement, unless stated otherwise (e.g. distribution is tax-exempt or distribution is a return of capital). If the distribution is taxable, your company must report the gross income indicated in the CDP statement as taxable income in the Corporate Income Tax Return for the relevant YA.
Learn more about the tax treatment of REIT distributions (PDF, 590KB) (refer to the ‘Tax Treatment of the Unit Holder’ section).
Is income derived from the sale of carbon credits taxable?
General income tax principles will apply to determine whether the income arising from the sale of carbon credits is taxable. This will depend on the facts and circumstances of each case. For a company trading in carbon credits, income arising from such trade will be regarded as revenue in nature. Where a company has purchased carbon credits for its business use, but sells the credits thereafter, the income derived will be considered as part and parcel of the company’s business income and hence, taxable.
My company is in the business of selling computers. If I transfer some computers from trading stock for office use by employees, is the transfer taxable?
The computers are the company’s trading stocks and are treated as sold on the date they are appropriated for a purpose other than for sale in the ordinary course of business. The resulting profit or loss which is computed based on the open market value of the trading stock as at the date of transfer is on revenue account and therefore is taxable or deductible.
Taxable Income Received in Singapore from Outside Singapore
Is foreign-sourced income that is kept offshore (‘foreign-sourced offshore income’) and used for payment of one-tier tax exempt dividends into the offshore bank account of my company’s shareholders considered received in Singapore and subject to tax?
No. The foreign-sourced offshore income used by your company in this manner does not constitute income received in Singapore from outside Singapore and is not taxable.
This is subject to the condition that the one-tier tax exempt dividend is paid directly into the shareholder’s offshore bank account and does not involve any physical remittance, transmission or bringing of funds into Singapore by your company for the dividend payment.
My company has foreign-sourced income that is kept offshore (‘foreign-sourced offshore income’). It transmitted the foreign-sourced offshore income from its offshore bank account to the Central Depository Pte Ltd’s (CDP) bank account in Singapore, for the payment of one-tier tax exempt dividends to its scripless shareholders. Is the foreign-sourced offshore income considered received in Singapore and subject to tax?
No. The foreign-sourced offshore income used by your company in this manner does not constitute income received in Singapore from outside Singapore and is not taxable.
This is subject to the condition that the one-tier tax exempt dividend is paid directly into the CDP’s bank account and does not involve any physical remittance, transmission or bringing of funds into Singapore by your company for the dividend payment.
What is the amount of foreign-sourced income taxable if the income is applied to purchase any movable property which is brought into Singapore?
The amount of foreign income that is applied to acquire the asset is taxable, and not the asset's net book value or market value at the time the asset was brought into Singapore.
My company carries on a trade or business in Singapore. It maintains a foreign bank account which is used to receive income or funds and pay expenses for both trade and non-trade purposes (i.e. the bank account has a mixed pool of funds from foreign-sourced offshore income and capital sources). My company wishes to remit only the capital funds into Singapore. How can my company prove to IRAS that only the capital funds have been remitted?
IRAS will accept the remitted funds as capital funds if your company meets either of the following conditions:
- Your company can provide an account of the funds from foreign-sourced offshore income and capital sources before the date of repatriation, and show that after the repatriation, the funds remaining outside Singapore are no less than the amount of foreign-sourced offshore income that has yet to be repatriated. To determine the amount of foreign-sourced offshore income that has yet to be repatriated, IRAS is prepared to allow any loss incurred overseas on revenue account to be set-off against the foreign-sourced offshore income derived.
- Your company can demonstrate that the amount repatriated is not more than the capital funds before the date of repatriation net of any losses incurred on capital account.
Example 1: Remitted funds comprise both foreign-sourced offshore income and capital funds
Foreign-sourced offshore income of $1,000 and capital funds of $500 were applied to acquire overseas investments of $1,500 in year 1. The overseas investments were subsequently disposed of at $1,800 in year 2 and the proceeds were brought into Singapore.
The foreign-sourced offshore income of $1,000 is considered remitted to Singapore and is taxable in year 2. The capital funds of $500 are not taxable while the taxability of the profit from the sale of $300 depends on whether it is a revenue or capital receipt.
Example 2: Remitted funds comprise only capital funds
Using the same example above, only part of the proceeds (i.e. $500) was brought into Singapore.
As the amount repatriated is not more than the capital funds applied to acquire the investments, IRAS is prepared to accept that only capital funds have been repatriated.
My company carries on a trade or business in Singapore. Is the foreign-sourced offshore income used by my company to repay a loan (used as working capital in my company’s trade or business carrying on in Singapore) considered received in Singapore and subject to tax?
Yes. The phrase ‘debt incurred in respect of a trade or business’ is not confined to trade debts that have been claimed as tax-deductible expenses for Singapore income tax purposes.
It applies to any debt arising from a trade or business carried on in Singapore (e.g. debts arising from the acquisition of trade or business assets, including loans taken for acquiring such assets). The foreign-sourced offshore income used by your company in this manner constitutes income received in Singapore from outside Singapore and is taxable.
My passive investment holding company derives only passive foreign-sourced offshore investment income (e.g. foreign interest income or foreign rental income). Is the foreign-sourced offshore income used by my company to settle overseas expenses (e.g. overseas professional fees or interest expenses) considered received in Singapore and subject to tax?
No. Your passive investment holding company is not considered as carrying on a trade or business in Singapore, thus, Section 10(25)(b) is not applicable. The foreign-sourced offshore income used by your company in this manner does not constitute income received in Singapore from outside Singapore and is not taxable.
This is subject to the condition that the overseas expenses are paid directly into the payee’s offshore bank account and do not involve any physical remittance, transmission or bringing of funds into Singapore by your company for paying the overseas expenses.
My company carries on a trade or business in Singapore. Is the foreign-sourced offshore income used by my company to settle non-trade debts (e.g. purchase an overseas investment that is not connected/ related to my company’s Singapore trade or business) considered received in Singapore and subject to tax?
No. The overseas investment is not connected/ related to your company’s trade or business carrying on in Singapore, thus, Section 10(25)(b) is not applicable. The foreign-sourced offshore income used by your company in this manner does not constitute income received in Singapore from outside Singapore and is not taxable.
This is subject to the condition that the debt repayment in relation to the overseas investment is paid directly into the payee’s offshore bank account and does not involve any physical remittance, transmission or bringing of funds into Singapore by your company for payment of the overseas investment.
My Singapore incorporated company is not a resident of Singapore. All its business operations are carried on outside Singapore except for a Singapore registered office required under the Singapore Companies Act 1967. Is foreign-sourced offshore income remitted into Singapore by my company considered received in Singapore and subject to tax?
Whether your company is operating in or from Singapore is a question of fact.
For a non-resident Singapore incorporated company with no business presence in Singapore, IRAS will examine the facts and circumstances (e.g. the reason/ purpose for incorporating the company in Singapore, nature of the company’s business activities, place of control and management of the business) to determine if the income is taxable.
Tax Treatment of Grants/ Payouts Commonly Received by Companies
Generally, a grant/ payout is taxable if it is given to supplement trading receipts or to defray operating expenses of the company (i.e. grant/ payout is revenue in nature). On the other hand, a grant/ payout is not taxable if it is given to acquire capital assets of the company (i.e. grant/ payout is capital in nature).
Tax deductions and allowances (i.e. capital allowances, writing-down allowances and investment allowances) are no longer given on expenditure funded by capital grants from the Government or Statutory Boards that are approved on or after 1 Jan 2021. For expenditure that is partially funded by capital grants, tax deductions and allowances are only allowed on the net amount.
List of Grants/ Payouts
The list of grants below is not intended to be exhaustive. Learn more about other types of grants available at Enterprise Singapore's website.
For the taxability of COVID-19-related payouts (e.g. Jobs Support Scheme (JSS)), refer to Income Tax Treatment of COVID-19-Related Payouts to Businesses and Individuals (PDF, 447KB).
|Grant/ Payout||Administering Agency||Purpose of Grant/ Payout||Tax Treatment of Grant/ Payout|
|Enterprise Development Grant||ESG||To support companies with projects that help them upgrade, innovate or venture overseas|
Taxable, unless the grant is awarded by ESG for the following categories:
|MSF||To defray companies' operating costs||Taxable as the payout is revenue in nature|
|iSPRINT||IMDA||To support SME's use of technology to boost SME's productivity and growth||Taxable as the grant is revenue in nature|
|Jobs Growth Incentive (JGI)||IRAS||To provide wage support to eligible employers with new local hires between Sep 2020 and Sep 2022||Taxable as the payout is revenue in nature|
|Productivity and Innovation Credit (PIC) Cash Payout
(This scheme has expired after the Year of Assessment (YA) 2018.)
|IRAS||To encourage companies to undertake improvements in productivity and innovation||Not taxable as the payout received is an outcome arising from the conversion of tax benefits (i.e. 400% tax deductions/ allowances) into cash|
|Progressive Wage Credit Scheme (PWCS)||IRAS|
To provide transitional wage support for employers to:
|Taxable as the payout is revenue in nature|
|Small Business Recovery Grant (SBRG)||IRAS||To provide one-off cash support to small businesses in sectors that were most affected by COVID-19 restrictions over the past year||Payout is exempted from tax|
|SkillsFuture Enterprise Credit||ESG||To defray companies' operating costs||Taxable as the payout is revenue in nature|
|SME Go Digital Programme||IMDA||To help SMEs use digital technologies, build strong digital capabilities and participate in the Digital Economy||Not taxable as the payout is capital in nature|
|Special Employment Credit||CPF Board||To defray companies' operating costs||Taxable as the payout is revenue in nature|
|Temporary Employment Credit||MOM||Employment credit given to help employers cope with higher wage costs arising from CPF changes taking place in 2015 and 2016 (i.e. increases in CPF contribution rates to the Medisave Account, CPF salary ceiling and employer CPF contribution rates for older workers)||Taxable as the payout is revenue in nature|
|Wage Credit||IRAS||To help companies that may face rising wage costs in a tight labour market||Taxable as the payout is revenue in nature|
Is the Foreign Worker Levy (FWL) rebate a taxable payout?
No. The FWL rebate is a refund of previous FWL paid and therefore it is not treated as an income/ payout.
Learn more about the tax treatment of the FWL rebate (refer to the table under the ‘Examples of Deductible & Non-Deductible Business Expenses’ section).
Tax Treatment of Digital Tokens
Digital Tokens Received as Payment
Businesses that choose to accept digital tokens such as Bitcoins for their remuneration or revenue are subject to normal income tax rules. They are taxed on the income derived from or received in Singapore. Tax deductions are allowed, where permissible, under our tax laws.
Generally, these businesses should record the sale based on the open market value of the goods or services in Singapore dollars. The same applies for businesses which pay for goods or services using digital tokens.
If the open market value of the goods or services that would have otherwise been exchanged in Singapore dollars cannot be determined (e.g. the good or service is only traded with digital tokens), the digital token exchange rate at the point of the transaction may be used.
Learn more about the tax treatment of digital tokens received as payment (PDF, 236KB).
Buying and Selling Digital Tokens
Businesses that buy and sell digital tokens in the ordinary course of their business are taxed on the profit derived from trading in the digital token. Profits derived by businesses which mine and trade digital tokens in exchange for money are also subject to tax.
Businesses that buy digital tokens for long-term investment purposes may enjoy capital gains from the disposal of these digital tokens. However, as there are no capital gains taxes in Singapore, such gains are not subject to tax.
Whether gains from the disposal of digital tokens are trading or capital gains depends on the facts and circumstances of each case. Factors such as purpose, frequency of transactions, and holding periods are considered when determining if such gains are taxable.
Learn more about the tax treatment of digital tokens (PDF, 236KB).