Taxes on Income Earned from Investments

Income Tax on Investments

When you earn income out of an investment you made in Singapore, you’ll be liable to make an income tax payment. Your investments can be in the form of property, unit trusts, shares, fixed deposits, and more. You are exempt from paying tax only when a specific type of your investment qualifies for income tax exemption under the ITA (Income Tax Act).

Let’s take a look at the different types of investments you can make in Singapore. Also, let’s understand the taxable and non-taxable components for each investment type.

When You Derive Income From a Property

Profits earned by selling your property: In general, a profit you’ve earned by selling a property within Singapore is not considered taxable since it is considered as a capital gain. Nevertheless, the gains might be considered as taxable if your intention was to make profits by either purchasing or selling your property.

Rental income: The complete rental amount plus any corresponding payments you get when your property is rented out refers to your rental income. This income will be subjected to income tax. Your rental income will include the rent of the property, furniture, maintenance, and fittings.


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When You Derive Income Via Unit Trusts/Shares

A dividend is a profit that is paid either in the form of cash or in-kind to you. This will be given to you as a share of your ownership in an organisation. A classic example of this would be when an organisation is paying dividends to its shareholders via the shares that belong to the company.

Starting from 1 January 2008, a Singapore resident organisation can issue 1-tier dividends which are exempted from tax. As in, a shareholder will no longer be taxed based on his/her dividend income. Nevertheless, a dividend that was received via shares in a co-operative firm will be considered as taxable.

Usually, income that is derived from unit trusts and REITs (Real Estate Investment Trusts) will not be considered for income tax calculation. However, this doesn’t include income which is derived by an individual via a partnership that was made in Singapore or by operating a business/trade/profession.

A dividend will be taxed in that particular year during which they were declared payable.

Example of Dividends that are Taxable:

  • A dividend which is paid by a co-operative.
  • A foreign-sourced dividend you’ve derived via a partnership that was made in Singapore. Other conditions may be applicable.

Examples of Dividends that are Non-taxable Include:

  • A dividend paid by a Singapore resident organisation on/post 1 January 2008 as per the 1-tier corporate tax system excluding co-operatives.
  • A foreign dividend you accepted in Singapore either on or post 1 January 2004 (you being a resident individual). If you as a Singapore resident receive a foreign-sourced dividend via a Singaporean partnership, this dividend might qualify for tax exemption if you comply with certain conditions.

When You Derive Income Through a Fixed Deposit

The interest you’ve earned via a deposit you have with an approved bank/licensed finance firm in Singapore will not be considered as taxable. If you’re looking at ways to save tax on the interest you’ve accrued via your fixed deposit, click here.

Also, interest earned from a debt security (for example bonds) is not considered as taxable unless you’ve derived interest from:

  • A partnership that was made in Singapore or
  • By operating a trade via a debt security.

IRAS renders various other tax schemes, policies, reliefs, and rebates to tax of Singapore as well as foreigners who are working/residing in Singapore. It is better you’re aware of the various tax-related benefits you're entitled to so you get to save on your income tax related payments.

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