What are the taxable and non-taxable personal investments in Singapore?

What are the taxable and non-taxable personal investments in Singapore?

What are the taxable and non-taxable personal investments in Singapore? Singapore is considered to be one of the most favorable places in the world for setting up a business. In fact, it also offers a strong investment climate to the expats coming to Singapore as well to the nationals of the country. In case you ask, “What makes Singapore a winner in the eyes of potential investors?” the reasons are many. The republic nation has a stable political environment, efficient government-free enterprise economy, excellent infrastructure and communication systems and a highly skilled workforce. It also provides a wide range of investment incentives that attracts a lot of foreign investors in the country.

Similarly personal investments, Singapore is considered to be a goldmine of opportunities. The absence of the capital gains tax and the broad tax treaty framework makes it highly feasible to make personal investments in Singapore. Especially if you know what taxable and non-taxable income in Singapore is, you can successfully grow your wealth in this country.

Taxable personal investments in Singapore

To understand the taxation system in Singapore, we will first take a look at the taxable personal investments in Singapore.

Income from employment

All forms of income you gain through employment are taxable in Singapore. This includes:

• Salary, Bonus, Director’s Fee, Commission and Others
• Gains from the Exercise of Stock Options
• Income Received from Overseas
• Pension
• Retrenchment and Retirement Benefits

According to the Inland Revenue Authority of Singapore (IRAS), all gains and profits derived an employee in respect of his employment are taxable. However, all types of ‘in-kind’ benefits such as sponsored group outings, family day events, etc. and employee reimbursements are non-taxable.

Income from a trade, business or profession

Income earned from a trade, business, profession or vocation is taxable by the Singapore government. This includes income received in the form of government grants such as the PIC Bonus, Special Employment Credit, and Wage Credit Payout. Even income received in the form of virtual currencies, through a partnership or received from overseas falls under the category of taxable income. Lastly, the income you make as a sole proprietor is considered to be taxable.

Income from rental property

If you plan on renting your apartment or commercial space in Singapore, you need to know that this income is also taxable. The IRAS refers to rental income as the full amount of rent and related payments you receive when you rent out your property. This includes rent of the premises, maintenance, furniture, and fittings. So, any profit or the net amount left once you have added together your rental income and deducted any allowable expenses is taxable.

Income from other investments

Apart from rental income, the dividends you earn are taxable. Dividends are the profits you make from your share of ownership in the company. As mentioned above, dividends are taxable. However, there are certain dividends that are non-taxable. The dividends paid on or after 1 Jan 2008 by a Singapore resident company under the one-tier corporate tax system are not taxable. Besides that, foreign dividends received in Singapore on or after 1 Jan 2004 by resident individuals are non-taxable. Other investments that are taxable are gains from sale of property, shares, and other financial instruments. And interest earned through deposits from non-approved banks in Singapore, pawnshops and other sources.

Non-taxable personal investments in Singapore

Now comes the good part! Here is the list of personal investments in Singapore that are non-taxable:

Gains from the sale of property

The Singapore government does not consider capital gains to be taxable. This implies the money you make from selling fixed assets (real estate). And gains on foreign exchange on capital transactions are not taxable. However, gains may be taxable if the individual buys and sells property with a profit-seeking motive. Furthermore, this is why we have mentioned income from the sale of a property to be taxable in the section above.

Income from real estate investment trust (REITs)

According to the IRAS, Income distribution from Real Estate Investment Trusts (REITs) is except distributions derived by individuals through a partnership in Singapore. Or from the carrying on of a trade, business or profession in REITs is exempt from taxes.

Income from fixed deposits

In addition, the profit you make from fixed deposits through approved banks in Singapore does not fall under the category of taxable income.

Overseas income received in Singapore

As per government regulations, the overseas income received in Singapore on or after 1st Jan 2004 is not considered to be taxable. But if the income you receive is through overseas partnerships. Besides that, if your work overseas is part of the work here in Singapore then the income receive in both cases is taxable.

Knowing what investment is taxable and what is non-taxable goes a long way in wealth creation. In fact, with the right tax planning, you can enjoy significant gains and savings to help you achieve personal goals.

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