Singapore updates guide to scheme exempting company gains on disposal of equity investments

The Inland Revenue Authority of Singapore (IRAS) has published an updated e-Tax guide – Certainty of Non-taxation of Companies’ Gains on Disposal of Equity Investments (Third Edition) – to reflect the extension of the scheme to 31 December 2027 announced in Budget 2020.

The guide provides details on the tax measure to give up-front certainty of non-taxation to companies that derive gains from the disposal of equity investments and is relevant to a company (divesting company) that disposes of investments in ordinary shares of another company (investee company) on or after 1 June 2012.

To qualify for the tax treatment, the divesting company must have held at least 20% of the ordinary shares in the investee company for a continuous period of at least 24 months prior to the date of share disposal. Exclusions apply if the divesting company is subject to certain tax rules, or if the investee company engages in certain types of activity.

Where the scheme is not applicable or used, the determination of whether gains or losses from a disposal of equity investments are income or capital in nature will continue to be based on the badges of trade and the facts and circumstances of each case. Normal tax rules apply to such gains or losses.

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