Historically, Singapore does not tax capital gains. Only gains which are “income” in nature are taxed.
However, come 1 January 2024, Singapore will introduce into law the new section 10L of the Income Tax Act 1947 (“ITA”). Under this new section 10L, Singapore will now tax gains received in Singapore from the sale or disposal of foreign assets. The ambit of this new section 10L will however exclude certain entities – for instance, those entities with “adequate economic substance” in Singapore and whose operations are managed and performed in Singapore.
The introduction of this new section 10L has created quite a stir among the Singapore tax community because this new section 10L, on the face of it, may potentially cover the taxation of capital gains. If it does cover the taxation of capital gains, then this may be a fundamental change in Singapore’s income tax regime because historically, Singapore taxes income, but not capital gains.