Business owners, the 30 November Corporate Income Tax filing deadline is fast approaching, and now is the time to get prepared. Make sure your financial records are up to date, with all income, expenses, and other business transactions accurately recorded. Review any recent disposals or investments to confirm whether they fall under capital or trading income and ensure all supporting documentation is ready for submission. Taking a proactive approach now will help you stay compliant, avoid penalties, and make the most of available tax efficiencies.

In Singapore, capital gains are generally not taxable, but trading income is. Misclassifying one as the other could lead to incorrect tax filing and risk unwanted audits, or even penalties from IRAS.

Capital Gains: Long-Term, Investment-Based Profits

Capital gains come from selling assets that your company holds for long-term investment, not for regular trading.

These generally include:

• Sale of shares in another business held for investment

   

• Disposal of property or equipment no longer used

   

• Sale of a subsidiary or business unit

   

Under IRAS’ current guidance, these profits are generally not taxable, since they arise from capital transactions rather than business trading.

New Rules on Foreign-Sourced Disposal Gains 

From 1 January 2024, Singapore introduced a new rule stating that certain foreign-sourced disposal gains, which were previously not taxable, may now be taxed if the profits are received in Singapore by your company. These gains can come from selling foreign assets such as shares, properties, or businesses located overseas.

Whether your company is taxed will depend on its economic substance in Singapore. If your business has real operations, management, and decision-making based here, the gains may remain exempt. However, if your company mainly holds investments without genuine activities in Singapore, these profits could now be treated as taxable income.

This change aligns Singapore’s tax framework with international standards and aims to ensure that tax benefits go to companies with real substance. If your business owns foreign assets or subsidiaries, it is important to review any disposals made from 1 January 2024, document your local substance, and make sure the gains are reported correctly in your next tax filing.

Trading Income: Frequent or Profit-Seeking Transactions

When your company buys and sells assets with a profit motive, especially if such sales happen regularly, IRAS treats the proceeds as trading income.

Examples include: 

• Frequent buying and selling of goods, properties, or shares

• Short-term flipping of investments

• Sales that form part of your normal business operations

• Sale of property for profit-seeking reasons

   

These profits are considered taxable income, even if they resemble one-off capital transactions on the surface.

How IRAS Decides: The “Badges of Trade”

IRAS and the Singapore courts rely on a set of factors, known as badges of trade, to decide whether a gain is capital or trading in nature:

Intention at Purchase

• • Was the asset bought for long-term use or for resale?

Frequency of Transaction

• • Are sales frequent or occasional?

Holding Period

• • Was the asset held for years or for months?

Nature of Asset

• • Is it something your business typically trades?

Financing Method

• • Was short-term borrowing used to fund the purchase?

Supplementary Work

• • Were efforts made to improve or market the asset before selling?

If several of these factors point toward trading activity, IRAS is likely to treat the gain as taxable income.

For example, when a Singapore company holds shares in a Malaysian joint venture for five years and sells them to fund expansion, the gain is likely a non-taxable capital gain, since the shares were held as a long-term investment.

Though if the same company actively trades shares every few months for short-term profit, IRAS would classify the profits as taxable trading income. 

The Bottom Line

With the 30 November filing deadline around the corner, it is time to review how your company’s recent disposals and investments are classified. Understanding the distinction between capital and trading income will help your business stay compliant while optimising its tax position. For more information on the corporate tax filing, you can refer to our handy guide here.

When in doubt, our team at Verti will always be here to help you ensure accurate and efficient reporting. Reach out to us at contactus@verti.sg or +65 6909 5691. 

All information accurate as of 24 October 2025