As a consequence, no income tax is due on sales of shares, properties, intangible assets, etc. This may be different, if the income is seen to have been derived from economic activities in conducting ones business. In Singapore there is no clear written guidance on the characterization of such proceeds to be considered tax-free capital gains or taxable trading income. Typically, the nature of the income will have to be determined, (e.g. by using the 6 badges of trade). Therefore, gains may be construed to be of an income nature and subject to income tax if they arise from activities which the IRAS regards as carrying on of a trade or business in Singapore.
There is a safe harbor rule of non-taxation on realizing gains for companies disposing shares held under the rule, gains derived by a divesting company from the disposal of ordinary shares in an investee company is not taxable if immediately, prior to the date of share disposal, the divesting company has held at least 20% of the ordinary shares in the investee company for a continuous period of at least 24 months (i.e. the divesting company must maintain a minimum ordinary shareholding level of at least 20% in the investee company whose ordinary shares are being disposed of).
The rule is applicable whether the investee company is incorporated in Singapore or elsewhere; listed or non-listed and applicable to disposals of ordinary shares in an investee company made during the period from 1 June 2012 to 31 May 2022 (both dates inclusive).