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Taxable and Non-Taxable Income

Updated: Jun 17, 2023

Taxable Income

Taxable income in Singapore refers to the income earned by individuals or companies that is subject to taxation under the Singapore tax system.

Taxable income

Companies are subjected to tax on taxable income that is:

-Accrued in or derived from Singapore

Income derived from a business conducted in Singapore is considered as accrued in or derived from Singapore. The concept of "accrued in or derived from" signifies that the income is generated within Singapore's geographical boundaries or has its source within Singapore, regardless of the residency status of the taxpayer.

-Received in Singapore from outside Singapore

Under Section 10(25) of the Income Tax Act, income derived from outside Singapore is deemed to be received in Singapore under the following circumstances:

1. When the income is remitted to, transmitted, or brought into Singapore.

2. When the income is used to settle any debt that is incurred in relation to a trade or business conducted in Singapore.

3. When the income is utilized to purchase movable property, such as equipment or raw materials, which is subsequently brought into Singapore.

For tax purposes in Singapore, taxable income encompasses various sources of revenue, including:

1. Gains or profits derived from any trade or business activities.

2. Income generated from investments, such as dividends received from shares, interest earned from loans or deposits, and rental income from properties.

3. Royalties, premiums, and any other profits obtained from the ownership of intellectual property or other forms of property.

4. Other gains that are considered revenue in nature and not specifically categorized under the aforementioned sources.

Not Taxable Income

Non-taxable income refers to income that is not subject to taxation or is exempted from taxation under specific provisions of the Singapore tax laws.

Capital Gains

non taxable income due to capital gain

Capital gains are not subject to taxation. These include:

1. Gains from the sale of fixed assets: When you sell a fixed asset, such as property, equipment, or investments, any profit or gain derived from the sale is not considered taxable income.

2. Gains from foreign exchange on capital transactions: If you engage in capital transactions involving foreign currencies, any gains or profits resulting from foreign exchange fluctuations are not subject to taxation.

Tax exempt income

Other than taxable and non-taxable Income mentioned above, under the provisions of the Income Tax Act 1947, there are specific types of income that are exempted from tax in Singapore, provided certain conditions are met.

These exempted income categories include:

1. Certain shipping income derived by a shipping company

Income derived by a shipping company from specific shipping activities falls under the exemptions outlined in Section 13A and Section 13E of the Act.

2. Foreign-sourced dividends, branch profits, and service income received by a resident company

Resident companies in Singapore may be eligible for tax exemptions on dividends, branch profits, and service income received from foreign sources, as outlined in Section 13(8) of the Act.

3. Gains derived by a company on the disposal of equity investments

Companies may enjoy exemptions on gains realized from the disposal of equity investments under the provisions of Section 13W.

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