Taxable & Non-Taxable Income - IRAS

Taxable income is income that is subject to tax, and not all income is taxable in Singapore. Home Taxes CorporateIncomeTax Income&DeductionsforCompanies Taxable&Non-TaxableIncome Taxable&Non-TaxableIncome CompaniesReceivingForeignIncome Nextlevel Back ApplyingforaCertificateofResidence/TaxReclaimForm BusinessExpenses Nextlevel Back TaxTreatmentofBusinessExpenses(A-F) TaxTreatmentofBusinessExpenses(G-L) TaxTreatmentofBusinessExpenses(M-R) TaxTreatmentofBusinessExpenses(S-Z) Business&IPCPartnershipScheme DoubleTaxDeductionforInternationalisationScheme Research&Development(R&D)TaxMeasures ClaimingAllowances Nextlevel Back CapitalAllowances Writing-DownAllowancesforIntellectualPropertyRights(IPRs) Mergers&Acquisitions(M&A)Allowance LandIntensificationAllowance(LIA) IndustrialBuildingAllowance(IBA) ClaimingReliefs Nextlevel Back ForeignTaxCredit GroupRelief LossCarry-BackRelief UnutilisedItems(CapitalAllowances,TradeLosses&Donations) ApplyingforTaxIncentives Taxableincomeisincomethatissubjecttotax,andnotallincomeistaxableinSingapore. Onthispage: HowtoDetermineWhetherYourIncomeisTaxable TaxTreatmentofGrants/PayoutsCommonlyReceivedbyCompanies TaxTreatmentofDigitalTokens RelatedContent HowtoDetermineWhetherYourIncomeisTaxableGenerally,incomeaccruedinorderivedfromSingaporeorreceivedfromoutsideSingaporeistaxable.Learnmorethroughoure-Learningvideoonthetaxabilityofincome.  WhatIsTaxable YourcompanyhastopaytaxinSingaporeontaxableincomethatis:AccruedinorderivedfromSingapore;orReceivedinSingaporefromoutsideSingapore.Forexample,theincomefromabusinesscarriedoninSingaporeisregardedasaccruedinorderivedfromSingapore.ForSingaporetaxpurposes,taxableincomerefersto:GainsorprofitsfromanytradeorbusinessIncomefrominvestmentsuchasdividends,interestandrentalRoyalties,premiumsandanyotherprofitsfrompropertyOthergainsthatarerevenueinnatureDeductionssuchasbusinessexpenses,capitalallowancesand reliefscanbeclaimedtoreducetaxableincome.Thisleadstolower taxes. IncomeReceivedinSingaporefromOutsideSingaporeUnderSection10(25)oftheIncomeTaxAct1947,incomefromoutsideSingaporeisconsideredreceivedinSingaporewhenitis:Remittedto,transmittedorbroughtintoSingapore;UsedtosatisfyanydebtincurredinrespectofatradeorbusinesscarriedoninSingapore;orUsedtopurchaseanymovableproperty(suchasequipment,rawmaterial,etc.)broughtintoSingapore.Section10(25)isappliedtotaxforeignincomereceivedinSingaporeonlyiftheincomebelongstoanindividual*whoisresidentinSingaporeoranentitythatislocatedinSingapore.Non-residentindividualsandforeignbusinessesthatarenotoperatinginorfromSingaporecanremittheirforeignincometoSingaporewithoutbeingtaxedontheincome.Asanadministrativeconcession,foreignincomethatisreinvestedoverseaswithoutbeingrepatriatedtoSingaporeisnotconsideredreceivedinSingaporeatthepointofreinvestment.Thismeansthatthetaxationoftheforeignincomeisdeferreduntil theinvestmentissoldandtheproceedsarebroughtintoSingapore.Iftheforeign-sourcedincomeissubjecttotaxinSingaporeandoverseas,taxreliefsmaybeavailabletoalleviatethedoubletaxationsuffered.Learnmoreabouttaxreliefsonforeignincome.*Allforeign-sourcedincomereceivedinSingaporebyresidentindividuals,exceptthosereceivedthroughaSingaporepartnership,isexemptfromtaxwheretheComptrollerofIncomeTaxissatisfiedthattheexemptionisbeneficialtothem. WhatIsNotTaxable CapitalGainsCapitalgainsarenottaxable.Theseinclude:GainsonsaleoffixedassetsGainsonforeignexchangeoncapitaltransactionsIncomeExemptedfromTaxCertaintypesofincomearespecificallyexemptedfromtaxundertheIncomeTaxAct1947,subjecttoconditions.Theseinclude:CertainshippingincomederivedbyashippingcompanyunderSection13AandSection13EForeign-sourceddividends,branchprofitsandserviceincomereceivedbyaresidentcompanyunderSection13(8)GainsderivedbyacompanyonthedisposalofequityinvestmentsunderSection13W(PDF,346KB) DeterminingtheExistenceofTrade Theword‘trade’isnotdefinedintheIncomeTaxAct1947.Whetheratradeisbeingcarriedonisaquestionoffact.Indeterminingwhetheratradeexists,certainfactorsaretakenintoconsideration.Allthefactorsaretakenintoconsiderationwhendeterminingwhetheratradeexists,andnosinglefactorisconclusive.1.NatureofSubjectMatterThisreferstothenatureoftheasset/propertythatisboughtandthensold.Someassets(e.g.commodities,manufactureditems)arenormallyregardedasthesubjectoftradingwhileothers,whennotboughtinquantity,arelesslikelytoberegarded astrading(e.g.antiques,artwork).2.LengthofOwnershipThisreferstotheholdingperiodoftheasset/propertyinquestion.Theshortertheholdingperiod,themorelikelyitisregardedasheldfortrading.3.FrequencyofTransactionsAhighfrequencyofsimilartransactionsismoreindicativeoftradingthananisolatedtransaction.4.SupplementaryWorkThisreferstoadditionalworkdoneontheasset/propertyinquestiontomakeitmoremarketableorextraeffortmadetofindorattractpurchasers.Ifthisisdone,itismorelikelythatthesubsequentdisposalisregardedastrading.5.CircumstancesoftheRealisationSomecircumstancesarelesslikelytobeindicativeoftrading(e.g.companyisforcedtosellthepropertyinquestionduetocompulsoryacquisition,suddenurgentneedofcashorthreatofforeclosurebycreditors).6.MotiveThisreferstowhethertherewasanintentiontotradeatthetimeoftheacquisitionoftheasset/propertyinquestion.7.ModeofFinancingThisreferstohowthepurchaseoftheasset/propertyinquestionisfinanced.Short-termfinancingismoreindicativeoftradingthanlong-termfinancing.Thecompany'sfinancialpositionandabilitytoholdontothepropertyisalsotakenintoconsideration.8.OtherFactorsOtherfactorsincludewhethertherewereanyfeasibilitystudiesconducted,theaccountingtreatmentadoptedbythecompany,theavailabilityofdocumentationorotherevidencemaintainedbythecompanytoindicateitsintention. FAQs WhatisTaxableMycompanyreceiveddonations.Arethedonationstaxable?Areexpensesincurredtogeneratethedonationstax-deductible?Ifthedonationsarenotvoluntarygiftsandarepaidinreturnforbenefitsgrantedbythereceivingorganisation,theyarebusinessreceiptsandconstituteincomethatistaxableinthehandsoftherecipient.Expensesincurredtogeneratethesetaxablereceiptsaredeductibleiftheyarewhollyandexclusivelyincurredintheproductionofincome,revenueinnatureandnotprohibitedfromdeductionundertheIncomeTaxAct1947.Learnmoreaboutthedeductibilityofexpenses.IsincomedistributionfromRealEstateInvestmentTrusts(REITs) taxable?Thenature,taxtreatmentandapplicableperiod/YearofAssessment(YA)ofeachREITdistributionarereflectedintheAnnualDistributionStatementissuedbytheCentralDepositoryPteLtd(CDP).AREITdistributionistaxableintherelevantYAasreflectedintheCDPstatement,unlessstatedotherwise(e.g.distributionistax-exemptordistributionisareturnofcapital).Ifthedistributionistaxable,yourcompanymustreportthe grossincomeindicatedintheCDPstatementastaxableincomeintheCorporateIncomeTaxReturnfortherelevantYA.LearnmoreaboutthetaxtreatmentofREITdistributions(PDF,590KB)(refertothe‘TaxTreatmentoftheUnitHolder’section).Isincomederivedfromthesaleofcarboncreditstaxable? New!Generalincometaxprincipleswillapplytodeterminewhethertheincomearisingfromthesaleofcarboncreditsistaxable.Thiswilldependonthefactsandcircumstancesofeachcase.Foracompanytradingincarboncredits,incomearising fromsuchtradewillberegardedasrevenueinnature.Whereacompanyhaspurchasedcarboncreditsforitsbusinessuse,butsellsthecreditsthereafter,theincomederivedwillbeconsideredaspartandparcelofthecompany’sbusiness incomeandhence,taxable.Mycompanyisinthebusinessofsellingcomputers.IfItransfersomecomputersfromtradingstockforofficeusebyemployees,isthetransfertaxable?New!Thecomputersarethecompany’stradingstocksandaretreatedassoldonthedatetheyareappropriatedforapurposeotherthanforsaleintheordinarycourseofbusiness.Theresultingprofitorlosswhichiscomputedbasedontheopen marketvalueofthetradingstockasatthedateoftransferisonrevenueaccountandthereforeistaxableordeductible.LearnmoreabouttheTaxTreatmentonAppropriationofTradingStockforNon-TradeorCapitalPurposesandConversionofNon-TradeorCapitalAssetstoTradingStock(PDF,273KB).TaxableIncomeReceivedinSingaporefromOutsideSingaporeIsforeign-sourcedincomethatiskeptoffshore(‘foreign-sourcedoffshoreincome’)andusedforpaymentofone-tiertaxexemptdividendsintotheoffshorebankaccountofmycompany’sshareholdersconsideredreceivedinSingaporeandsubjecttotax?No.Theforeign-sourcedoffshoreincomeusedbyyourcompanyinthismannerdoesnotconstituteincomereceivedinSingaporefromoutsideSingaporeandisnottaxable.Thisissubjecttotheconditionthattheone-tiertaxexemptdividendispaiddirectlyintotheshareholder’soffshorebankaccountanddoesnotinvolveanyphysicalremittance,transmissionorbringingoffundsintoSingaporebyyourcompany forthedividendpayment.Mycompanyhasforeign-sourcedincomethatiskeptoffshore(‘foreign-sourcedoffshoreincome’).Ittransmittedtheforeign-sourcedoffshoreincomefromitsoffshorebankaccounttotheCentralDepositoryPteLtd’s(CDP)bankaccountinSingapore,forthepaymentofone-tiertaxexemptdividendstoitsscriplessshareholders.Istheforeign-sourcedoffshoreincomeconsideredreceivedinSingaporeandsubjecttotax?No.Theforeign-sourcedoffshoreincomeusedbyyourcompanyinthismannerdoesnotconstituteincomereceivedinSingaporefromoutsideSingaporeandisnottaxable.Thisissubjecttotheconditionthattheone-tiertaxexemptdividendispaiddirectlyintotheCDP’sbankaccountanddoesnotinvolveanyphysicalremittance,transmissionorbringingoffundsintoSingaporebyyourcompanyforthedividend payment. Whatistheamountofforeign-sourcedincometaxableiftheincomeis appliedtopurchaseanymovablepropertywhichisbroughtintoSingapore?Theamountofforeignincomethatisappliedtoacquiretheassetistaxable,andnottheasset'snetbookvalueormarketvalueatthetimetheassetwasbroughtintoSingapore.MycompanycarriesonatradeorbusinessinSingapore.Itmaintainsaforeignbankaccountwhichisusedtoreceiveincomeorfundsandpayexpensesforbothtradeandnon-tradepurposes(i.e.thebankaccounthasamixedpooloffundsfromforeign-sourcedoffshoreincomeandcapitalsources).MycompanywishestoremitonlythecapitalfundsintoSingapore.HowcanmycompanyprovetoIRASthatonlythecapitalfundshavebeenremitted?IRASwillaccepttheremittedfundsascapitalfundsifyourcompanymeetseitherofthefollowingconditions:Yourcompanycanprovideanaccountofthefundsfromforeign-sourcedoffshoreincomeandcapitalsourcesbeforethedateofrepatriation,andshowthataftertherepatriation,thefundsremainingoutsideSingaporearenolessthantheamount offoreign-sourcedoffshoreincomethathasyettoberepatriated.Todeterminetheamountofforeign-sourcedoffshoreincomethathasyettoberepatriated,IRASispreparedtoallowanylossincurredoverseasonrevenueaccounttobe set-offagainsttheforeign-sourcedoffshoreincomederived.Yourcompanycandemonstratethattheamountrepatriatedisnotmorethanthecapitalfundsbeforethedateofrepatriationnetofanylossesincurredoncapitalaccount.Example1:Remittedfundscomprisebothforeign-sourcedoffshoreincomeandcapitalfundsForeign-sourcedoffshoreincomeof$1,000andcapitalfundsof$500wereappliedtoacquireoverseasinvestmentsof$1,500inyear1.Theoverseasinvestmentsweresubsequentlydisposedofat$1,800inyear2andtheproceedswerebroughtinto Singapore. Theforeign-sourcedoffshoreincomeof$1,000isconsideredremittedtoSingaporeandistaxableinyear2.Thecapitalfundsof$500arenottaxablewhilethetaxabilityoftheprofitfromthesaleof$300dependsonwhetheritisarevenueor capitalreceipt.Example2:RemittedfundscompriseonlycapitalfundsUsingthesameexampleabove,onlypartoftheproceeds(i.e.$500)wasbroughtintoSingapore.Astheamountrepatriatedisnotmorethanthecapitalfundsappliedtoacquiretheinvestments,IRASispreparedtoacceptthatonlycapitalfundshavebeenrepatriated.MycompanycarriesonatradeorbusinessinSingapore.Istheforeign-sourcedoffshoreincomeusedbymycompanytorepayaloan(usedasworkingcapitalinmycompany’stradeorbusinesscarryingoninSingapore)consideredreceivedinSingaporeandsubjecttotax?Yes.Thephrase‘debtincurredinrespectofatradeorbusiness’isnotconfinedtotradedebtsthathavebeenclaimedastax-deductibleexpensesforSingaporeincometaxpurposes.ItappliestoanydebtarisingfromatradeorbusinesscarriedoninSingapore(e.g.debtsarisingfromtheacquisitionoftradeorbusinessassets,includingloanstakenforacquiringsuchassets).Theforeign-sourcedoffshoreincomeusedby yourcompanyinthismannerconstitutesincomereceivedinSingaporefromoutsideSingaporeandistaxable.Mypassiveinvestmentholdingcompanyderivesonlypassiveforeign-sourcedoffshoreinvestmentincome(e.g.foreigninterestincomeorforeignrentalincome).Istheforeign-sourcedoffshoreincomeusedbymycompanytosettleoverseasexpenses(e.g.overseasprofessionalfeesorinterestexpenses)consideredreceivedinSingaporeandsubjecttotax?No.YourpassiveinvestmentholdingcompanyisnotconsideredascarryingonatradeorbusinessinSingapore,thus,Section10(25)(b)isnotapplicable.Theforeign-sourcedoffshoreincomeusedbyyourcompanyinthismannerdoesnotconstitute incomereceivedinSingaporefromoutsideSingaporeandisnottaxable.Thisissubjecttotheconditionthattheoverseasexpensesarepaiddirectlyintothepayee’soffshorebankaccountanddonotinvolveanyphysicalremittance,transmissionorbringingoffundsintoSingaporebyyourcompanyforpaying theoverseasexpenses.MycompanycarriesonatradeorbusinessinSingapore.Istheforeign-sourcedoffshoreincomeusedbymycompanytosettlenon-tradedebts(e.g.purchaseanoverseasinvestmentthatisnotconnected/relatedtomycompany’sSingaporetradeorbusiness)consideredreceivedinSingaporeandsubjecttotax?No.Theoverseasinvestmentisnotconnected/relatedtoyourcompany’stradeorbusinesscarryingoninSingapore,thus,Section10(25)(b)isnotapplicable.Theforeign-sourcedoffshoreincomeusedbyyourcompanyinthismannerdoesnot constituteincomereceivedinSingaporefromoutsideSingaporeandisnottaxable.Thisissubjecttotheconditionthatthedebtrepaymentinrelationtotheoverseasinvestmentispaiddirectlyintothepayee’soffshorebankaccountanddoesnotinvolveanyphysicalremittance,transmissionorbringingoffundsinto Singaporebyyourcompanyforpaymentoftheoverseasinvestment.MySingaporeincorporatedcompanyisnotaresidentofSingapore.AllitsbusinessoperationsarecarriedonoutsideSingaporeexceptforaSingaporeregisteredofficerequiredundertheSingaporeCompaniesAct1967.Isforeign-sourcedoffshoreincomeremittedintoSingaporebymycompanyconsideredreceivedinSingaporeandsubjecttotax?WhetheryourcompanyisoperatinginorfromSingaporeisaquestionoffact.Foranon-residentSingaporeincorporatedcompanywithnobusinesspresenceinSingapore,IRASwillexaminethefactsandcircumstances(e.g.thereason/purposeforincorporatingthecompanyinSingapore,natureofthecompany’sbusiness activities,placeofcontrolandmanagementofthebusiness)todetermineiftheincomeistaxable. TaxTreatmentofGrants/PayoutsCommonlyReceivedbyCompaniesGenerally,agrant/payoutistaxableifitisgiventosupplementtradingreceiptsortodefrayoperatingexpensesofthecompany(i.e.grant/payoutisrevenueinnature).Ontheotherhand,agrant/payoutisnottaxableifitisgiventoacquirecapital assetsofthecompany(i.e.grant/payoutiscapitalinnature).Taxdeductionsandallowances(i.e.capitalallowances,writing-downallowancesandinvestmentallowances)arenolongergivenonexpenditurefundedbycapitalgrantsfromtheGovernmentorStatutoryBoardsthatareapprovedonorafter1Jan2021.For expenditurethatispartiallyfundedbycapitalgrants,taxdeductionsandallowancesareonlyallowedonthenetamount. ListofGrants/Payouts Thelistofgrantsbelowisnotintendedtobeexhaustive.LearnmoreaboutothertypesofgrantsavailableatEnterpriseSingapore'swebsite.ForthetaxabilityofCOVID-19-relatedpayouts(e.g.JobsSupportScheme(JSS)),refertoIncomeTaxTreatmentofCOVID-19-RelatedPayoutstoBusinessesandIndividuals(PDF,111KB).Grant/PayoutAdministeringAgencyPurposeofGrant/PayoutTaxTreatmentofGrant/PayoutEnterpriseDevelopmentGrantESGTosupportcompanieswithprojectsthathelpthemupgrade,innovateorventureoverseasTaxable,unlessthegrantisawardedbyESGforthefollowingcategories:AutomationProductdevelopmentMergersandacquisitionsOverseasmarketingpresencePilotprojectandtestbeddingGovernment-PaidLeaveSchemesAdoptionLeaveforMothers(AL)Government-PaidChildcareLeave(GPCL)andExtendedChildcareLeave(ECL)Government-PaidMaternityLeave(GPML) Government-PaidPaternityLeave(GPPL)Government-PaidSharedParentalLeave(SPL) MSFTodefraycompanies'operatingcostsTaxableasthepayoutisrevenueinnatureiSPRINTIMDATosupportSME'suseoftechnologytoboostSME'sproductivityandgrowthTaxableasthegrantisrevenueinnatureUpdated!JobsGrowthIncentive(JGI)IRASToprovidewagesupporttoeligibleemployerswithnewlocalhiresbetweenSep2020andSep2022TaxableasthepayoutisrevenueinnatureProductivityandInnovationCredit(PIC)CashPayout (ThisschemehasexpiredaftertheYearofAssessment(YA)2018.)IRASToencouragecompaniestoundertakeimprovementsinproductivityandinnovationNottaxableasthepayoutreceivedisanoutcomearisingfromtheconversionoftaxbenefits(i.e.400%taxdeductions/allowances)intocashNew!ProgressiveWageCreditScheme(PWCS)IRASToprovidetransitionalwagesupportforemployersto:Adjusttoupcomingmandatorywageincreasesforlower-wageworkerscoveredbytheProgressiveWageandLocalQualifyingSalaryrequirements;andVoluntarilyraisewagesoflower-wageworkersTaxableasthepayoutisrevenueinnature New!SmallBusinessRecoveryGrant(SBRG)IRASToprovideone-offcashsupporttosmallbusinessesinsectorsthatweremostaffectedbyCOVID-19restrictionsoverthepastyearPayoutisexemptedfromtaxSkillsFutureEnterpriseCreditESGTodefraycompanies'operatingcostsTaxableasthepayoutisrevenueinnatureSMEGoDigitalProgrammeIMDATohelpSMEsusedigitaltechnologies,buildstrongdigitalcapabilitiesandparticipateintheDigitalEconomyNottaxableasthepayoutiscapitalinnatureSpecialEmploymentCreditCPFBoardTodefraycompanies'operatingcostsTaxableasthepayoutisrevenueinnatureTemporaryEmploymentCredit MOMEmploymentcreditgiventohelpemployerscopewithhigherwagecostsarisingfromCPFchangestakingplacein2015and2016(i.e.increasesinCPFcontributionratestotheMedisaveAccount,CPFsalaryceilingandemployerCPFcontribution ratesforolderworkers)TaxableasthepayoutisrevenueinnatureWageCreditIRASTohelpcompaniesthatmayfacerisingwagecostsinatightlabourmarketTaxableasthepayoutisrevenueinnature TaxTreatmentofDigitalTokensBusinessesthatchoosetoacceptdigitaltokenssuchasBitcoinsfortheirremunerationorrevenueorthattradeindigitaltokensaresubjecttonormalincometaxrules. DigitalTokensReceivedasPayment BusinessesthatchoosetoacceptdigitaltokenssuchasBitcoinsfortheirremunerationorrevenuearesubjecttonormalincometaxrules.TheyaretaxedontheincomederivedfromorreceivedinSingapore.Taxdeductionsare allowed,wherepermissible,underourtaxlaws.Generally,thesebusinessesshouldrecordthesalebasedontheopenmarketvalueofthegoodsorservicesinSingaporedollars.Thesameappliesforbusinesseswhichpayforgoodsorservices usingdigitaltokens.IftheopenmarketvalueofthegoodsorservicesthatwouldhaveotherwisebeenexchangedinSingaporedollarscannotbedetermined(e.g.thegoodorserviceisonlytradedwithdigitaltokens),thedigitaltokenexchange rateatthepointofthetransactionmaybeused.Learnmoreaboutthetaxtreatmentofdigitaltokensreceivedaspayment(PDF,236KB). BuyingandSellingDigitalTokens Businessesthatbuyandselldigitaltokensintheordinarycourseoftheirbusinessaretaxedontheprofitderivedfromtradinginthedigitaltoken.Profitsderivedbybusinesseswhichmineandtradedigitaltokensinexchangefor moneyarealsosubjecttotax. Businessesthatbuydigitaltokensforlong-terminvestmentpurposesmayenjoycapitalgainsfromthedisposalofthesedigitaltokens.However,astherearenocapitalgainstaxesinSingapore,suchgainsarenotsubjecttotax. Whethergainsfromthedisposalofdigitaltokensaretradingorcapitalgainsdependsonthefactsandcircumstancesofeachcase.Factorssuchaspurpose,frequencyoftransactions,andholdingperiodsareconsideredwhendeterminingifsuchgainsaretaxable. Learnmoreaboutthetaxtreatmentofdigitaltokens(PDF,236KB). Pages CompaniesReceivingForeignIncome