Singapore Amends Tax Law for Foreign Asset Gains

Singapore Amends Tax Law for Foreign Asset Gains

Significant changes to Singapore’s tax structure are anticipated with the upcoming implementation of the October 3, 2023, enacted Income Tax (Amendment) Bill. 

Establishing a new section, Section 10L, which regulates the treatment of gains from the sale or disposal of foreign assets, is one of the amendment’s most essential features. On January 1, 2024, this legislation modification is scheduled to effect.

The Inland Revenue Authority of Singapore (IRAS) has released an e-tax Guide, which thoroughly explains the modifications and their effects on taxpayers to make sense of the new tax system.

The following are some essential points to assist you in comprehending the impending changes: 

Taxation of gains from disposals made abroad

Gains from the sale or disposal of foreign assets—which might include any movable or immovable property situated outside of Singapore—will be treated as taxable income in Singapore under the new laws.

These gains, often known as “foreign-sourced disposal gains,” will be liable to taxes in the following circumstances: 

Gains from disposal of foreign-sourced assets received in Singapore

If a covered entity receives gains in Singapore from outside Singapore, they will be subject to taxation. The e-Tax Guide’s Section 4.4 contains the specific requirements for this.

A member entity of a relevant group is referred to as a “covered entity” if the group’s entities are not fully incorporated or registered in Singapore or if their business place is outside the country. Additional information is provided in the e-Tax Guide’s Section 5. 

Organisations in Singapore without sufficient Economic Substance

Taxation on these gains will also apply to Singapore entities needing more economic substance. Section 8 of the e-Tax Guide outlines the standards for determining economic substance. It considers the needs of companies that hold pure or non-pure equity and those that outsource economic activity.

Export/import of intellectual property rights (IPRs) 

This new tax system will also apply to gains from the sale or other disposal of foreign intellectual property rights (IPRs).

Application of the modifications 

The Income Tax (Amendment) Bill’s modifications will be implemented for all sales and disposals of foreign assets on or after January 1, 2024.

Please see Section 4.3 of the e-Tax Guide for examples of how these improvements will be implemented in the real world. 

The goal of these modifications to Singapore’s income tax legislation is to guarantee an equitable and open tax system while advancing the nation’s economy. To correctly manage the changing tax landscape, taxpayers and businesses should peruse the e-Tax Guide and engage with tax professionals.