Singapore

Corporate - Income determination

Last reviewed - 06 February 2020

Inventory valuation

There are no special rules as to which valuation basis should be adopted for inventories (stock-in-trade) in the case of a continuing business, as long as the basis is consistent from one year to another. However, a last in first out (LIFO) basis of valuation is not permitted for tax purposes. Generally, tax reporting conforms to book reporting.

Capital gains

There is no tax on capital gains. Where there is a series of transactions or where the holding period of an asset is relatively short, the tax authorities may take the view that a business is being carried on and attempt to assess the gains as trading profits of the corporation. The United Kingdom (UK) Badges of Trade, which are used in judicial decisions to distinguish capital and revenue transactions, are generally applied in determining this issue. They include the existence of a profit-seeking motive, the number of transactions, the nature of the asset, the existence of similar trading transactions or interests, the way the sale was carried out, the source of finance, the interval of time between purchase and sale, and the method of acquisition.

Gains derived by a company from the disposal of ordinary shares that take place between 1 June 2012 and 31 May 2022 will not be taxed if the company has held at least 20% of the ordinary shares in the investee company for a continuous period of at least 24 months prior to the disposal. This protection does not apply to gains derived by an insurance company or disposal of shares in certain companies that trade or hold immovable properties.

Dividend income

Singapore dividends are exempt in the hands of the recipient.

Interest income

Singapore-sourced interest income is taxable when it arises, and foreign-sourced interest is taxable when it is remitted or deemed to be remitted to Singapore. For further details on foreign-sourced interest income and the availability of foreign tax credit, refer to Foreign income below.

Royalty income

Singapore-sourced royalty income is taxable when it arises, and foreign-sourced royalty income is taxable when it is remitted or deemed to be remitted to Singapore. For further details on foreign-sourced royalty income and the availability of foreign tax credit, refer to Foreign income below.

Foreign income

A corporation, whether resident in Singapore or not, is taxed on foreign income when it is received in Singapore. Legislative provisions govern the basis of treating foreign income as received in Singapore. There are no special rules for taxing the undistributed income of foreign subsidiaries.

Where income is earned from treaty countries, double taxation is avoided by means of foreign tax credit granted under those treaties. For non-treaty countries, unilateral tax credit is given in respect of foreign tax on all foreign-sourced income. These foreign tax credits may be pooled, subject to certain conditions.

Foreign dividends, foreign branch profits, and foreign service fee income remitted to Singapore may be exempt from tax if they fulfil certain conditions.