One consideration for investors if whether you need to pay tax on investments in Singapore. Tax is the levy you pay on income generated in a country based on its specific tax laws.
The good news is that Singapore is a very tax-friendly country for investors.
You make money on the stock market in two ways:
1) If you sell the stocks of the company at a higher price than what you bought it for, you would earn a profit or what is called a capital gain.
2) If the company you own stock in has high profits and in turn pays out dividends to its shareholders, you receive money once, twice or four times a year (depending on the company’s policy).
In Singapore, as a passive investor, you do not have to pay capital gain tax from the sale of successful investments.
However, if you are professional trader, gains or profits from active trading can be considered of an income nature and thus taxable as part of your trade income.
Certain dividends is considered part of your income and has to be declared as such when you file for you taxes every year.
For example, here are some examples of non-taxable dividends:
Dividends from companies listed on the Singapore Stock Exchange, as shown in the statement from Central Depository Pte Ltd (CDP)
Dividends from share buyback through Special Trading Counters (STC)
Dividends from private companies
NTUC Fair-Price dividends (except for dividends received through co-operatives)
Singapore dividends from approved CPF investment Scheme agent banks, as shown in the Annual Dividend Statement (ADS)
Singapore dividends from Supplementary Retirement Scheme (SRS)
Singapore dividends from Units Trusts
Visit the IRAS website to find out which dividends are tax exempt or consult your tax accountant.
You are also not taxed for capital gain from the sale of successful investments made in overseas markets. However, certain countries may tax you on capital gains at their prevailing tax rate. Most often, a withholding tax will be implemented through the stock broker so the tax calculation is automatic.
Note that dividends from securities in overseas market is taxable. But, if the dividends is taxed (withholding tax) by the country in the market that you invested in, you do not have to pay additional tax in Singapore.
You need to declare all taxable dividends in your income tax return under ‘Other Income’.
Disclaimer: With regards to your taxable income on investments, the above is only a guide based on current available information and should not be construed as tax advice. Please consult your tax accountant to determine your exact tax liability.