Changes to Taxation of Certain Capital Gains from Disposal of Foreign Assets in Singapore wef 1 January 2024

Currently, gains derived by a company from the disposal of ordinary shares that occurs during 1 June 2012 and 31 December 2027 are potentially exempt from Singapore corporate tax if it has legally and beneficially held at least 20% of the ordinary shares in the investee company continuously for at least 24 months immediately prior to the disposal. In addition, generally capital gains are generally not taxable in Singapore.

However this will change with effect from 1 January 2024 with the newly legislated Section 10L of the Income Tax Act (Section 10L), which taxes any gains from the sale or disposal of foreign assets by an entity of a relevant group if the gains are received in Singapore at 17% unless they can be exempted [1].

Under the new Section 10L, companies which are not pure equity holding companies (eg. investment holding companies holding properties or a mixed portfolio of investments such as cryptocurrencies and debt instruments) and not specifically exempted would have to satisfy more stringent economic substance requirements such as carrying on a trade, business or profession in Singapore, have their operations managed and performed in Singapore, have reasonable economic substance in Singapore, etc.

How Mazars can help

We would encourage companies to review their operations and investments to assess the impact of the changes on them.

At Mazars, we can assist you to conduct a comprehensive assessment of your operations against the new rules for impact analysis and advise how to structure your operations from a tax perspective so as not to be caught by these new rules.

[1] Qualifying financial institutions, entities enjoying certain tax incentives and entities that meet certain economic substance requirements.