Although Singapore does not impose tax on capital gains, the definition of capital is not addressed in its tax legislation or other government sources. Historically, this has created uncertainty for share transactions in Singapore, as the divesting company must justify the facts and circumstances of each case in determining whether a transaction is capital (i.e., not taxable) or revenue (i.e., taxable).
Under Singapore's 2012 budget, gains arising to Singapore companies on the disposal of shares would not be subject to income tax where the following conditions are met:
- The divesting company holds a minimum shareholding of 20% in the company being disposed of
- The divesting company maintains the minimum shareholding for a minimum of 24 months prior to disposal.
For disposals that do not meet these conditions, Singapore will continue its existing approach of looking at the facts and circumstances of each transaction.
For more information, contact your KPMG adviser.