Trading Taxes in Singapore
Your tax liability when trading in Singapore depends on several factors, including the frequency and volume of trades, and on how the Inland Revenue Authority of Singapore (IRAS) classifies what is taxable and what is not.
This guide will look at day trader tax laws, implications and rates set out by the IRAS. It will unpack specific asset rules and offer tips to help manage your obligations, including tax software.
Key Takeaways
- The Inland Revenue Authority of Singapore (IRAS) is the body responsible for collecting taxes from online trading.
- For most individual taxpayers in Singapore, the tax year (basis period for a year of assessment) runs from 1 January to 31 December, and personal income tax returns are generally due in mid-April of the following year.
- Tax obligations will vary depending on multiple factors, from the regularity and size of trades to the product traded and the individual’s financial circumstances.
- Taxes can be mitigated, to a degree, through deductions for valid expenses used to support trading activities.
Best Brokers In Singapore
These are the 4 top brokers for traders based in Singapore:
How Trading Taxes Work
Taxes for day trading in Singapore can vary depending on several criteria judged by the IRAS. This distinction between non-taxable capital gains and taxable trading income is reflected in IRAS’ guidance on gains from the sale of property, shares and financial instruments.
On the whole, however, the tax treatment is fair and advantageous in comparison to other nations’ systems.
Day Trading vs Long-Term
Importantly, tax implications will vary considerably between short-term day trading and long-term investing.
Long-Term Investing
Taxes in Singapore are favorable towards long-term investors compared to other major jurisdictions. Singapore does not impose a general capital gains tax, and most dividends paid by Singapore-resident companies to individuals are tax-exempt, though certain types of dividends and trading profits can still be taxable.
This is unlike the US, for example, where you often have to part with a sizeable percentage of your earnings.
Day Trading
The rules around day trading taxes in Singapore are not always clear.
Those required to pay taxes on trading profits will do so under the progressive resident income tax rates, which currently range from 0% on the first S$20,000 of chargeable income up to 24% on income above S$1,000,000 (for recent Years of Assessment, check the latest IRAS tables).
However, this will depend on the determination of your local tax authority. The IRAS looks at several factors, sometimes referred to as ‘badges of trade’, when deciding if your activity amounts to trading for tax purposes:
- Volume – The frequency and volume of your trades are one factor IRAS considers. Occasional or ad-hoc trades are more likely to be viewed as personal investments, whereas frequent and systematic trading is more likely to be treated as taxable trading income.
- Pattern – Do you trade in an organized manner, similar to that of established and full-time traders?
- Sole income – Whether trading is your main source of livelihood is another factor IRAS may consider, but it is not decisive on its own. Significant, organised trading activity can be taxable even if you also have a salaried job, and small-scale investing can be non-taxable even if you have no other income.
- Finance – Having a specific pool of capital, using leverage, and keeping detailed trading records may indicate that you are running a trading business rather than casually investing, and this can make it more likely that IRAS treats your profits as taxable income.
Unfortunately, this makes taxes on day trading income in Singapore a grey area. The main consideration is whether you day trade full-time or supplement your income.
However, if you are unsure, you can always contact the IRAS directly for clarification. Each situation is decided on a case-by-case basis.
What If You Use An Overseas Broker?
Despite the growing number of brokerages in Singapore, many still look abroad for high-quality platforms and low costs.
According to IRAS and the Ministry of Finance, for Singapore-tax-resident individuals, overseas income received in Singapore on or after the 1st of January 2004 is not generally taxable, excluding certain situations.
For further clarification, see the IRAS guidance on income received overseas.
Deductions
Taxes for day trading in Singapore can be mitigated via deductions, which can be claimed as allowable business expenses for self-employed traders. This could include a reasonable portion of your internet bills, market data or research subscriptions, and other costs that are wholly and exclusively incurred in producing your trading income.
With that said, traders should bear in mind that the IRAS may require receipts and evidence that the items listed are strictly for intraday trading.
Asset Specific Taxes
With the emergence of cryptocurrency and developments in global technology, there remains a question of whether different assets will incur different day trading income rates. For example, will day trading options and futures taxes be the same as forex and stock taxes?
For the most part, the IRAS is more concerned with how and why you are trading. What you are trading is usually secondary. Having said that, there exist some markets where regulations remain unclear.
Forex
Most retail trading brokers do not withhold Singapore income tax on your trading profits, so they generally make no tax deductions from your trades. The legal responsibility rests solely with the client.
If your forex activity is genuinely occasional or long-term and looks more like investing than running a business, gains are often treated as non-taxable capital in Singapore.
However, if your forex trading has the characteristics of a trading business, for example, high frequency, short holding periods, systematic activity and a clear intention to profit, IRAS may treat the profits as taxable income, regardless of whether it is your main job or a side activity.
How you withdraw or move your trading funds does not change whether they are taxable. For Singapore-tax-resident individuals, most foreign-sourced income received in Singapore is generally not taxable, subject to specific exceptions, while foreign-sourced income of companies and partnerships can be taxable depending on the circumstances and exemption conditions.
You should not rely on leaving funds in overseas accounts or payment systems as a way to avoid tax, and you remain responsible for declaring any taxable income in line with IRAS guidance.
If you have doubts or require clarification, seek professional tax advice. Alternatively, contact the IRAS.
Cryptocurrency
Developments have shown that if you buy and sell digital currencies as long-term investments, your profits may not be subject to taxes.
However, short-term investors may face trading income tax in Singapore on their takings. Any exemptions will be considered on a case-by-case basis. They will consider the purpose of your transactions, the frequency, and the holding periods.
Back in 2013, MAS indicated that whether businesses accepted Bitcoin as payment was largely a commercial decision and that virtual currencies themselves would not then be regulated.
Since then, however, the Monetary Authority of Singapore (MAS) and IRAS have repeatedly warned that digital payment tokens are highly risky for the general public and have introduced substantial regulations for digital token service providers. Singapore supports responsible fintech innovation, but it is no longer accurate to describe it as a ‘safe haven’ for unregulated cryptocurrency activity.
IRAS has also clarified that many digital tokens are not legal tender and, historically, supplies of virtual currencies were treated as taxable services for GST. From 1 January 2020, however, ‘digital payment tokens’ such as widely-used cryptocurrencies are covered by specific GST rules under which their exchange for fiat currency or other digital payment tokens is exempt from GST, and their use as payment is generally disregarded for GST purposes (GST still applies to the underlying goods or services where taxable).
If you hold digital tokens purely as a long-term investment, any gains are typically treated as capital in nature and are not taxed in Singapore, because there is no general capital gains tax regime. However, if you actively trade or deal in digital tokens as a business, the resulting profits can be taxable as income.
Stocks
Stock taxes are more straightforward. Investors are typically not liable for capital gains tax when trading stocks in Singapore.
Day trading in shares does not attract any special personal income tax concessions – if your share activities amount to a trading business, the resulting profits are taxed at your normal income tax rates.
Day Trading Tax Preparation
Keep A Record
For most individual taxpayers in Singapore, the tax year (basis period for a Year of Assessment) runs from 1 January to 31 December, and personal income tax returns are generally due by 15 April the following year for paper filing (and 18 April for e-filing). Always check the latest IRAS income tax filing deadlines.
As such, it is important for traders to keep a record of their annual trade history in preparation for filing. The IRAS may request details on a significant portion of your trades, including details of the below:
- Instrument
- Price
- Purchase & sale date
- Size
- Entry & exit point
Trader Tax Preparation Software
Accounting software and tax calculation apps are readily available, some of which can be linked directly to your brokerage.
Some brokers also offer useful trading reports which can be exported from your account. eToro, for example, has integrated software that provides reports tailored to your location and local tax rules.
Final Thoughts
Strictly speaking, Singapore does not levy a broad-based capital gains tax. However, intraday or short-term profits that IRAS treats as trading income (rather than capital gains) are taxable.
There are several factors to consider when calculating your taxable profits, so it is recommended that you seek clarification from the IRAS if you have any queries. Alternatively, obtain professional guidance from an accountant or advisor.
This article is not trying to offer tax advice; it merely aims to decipher the multitude of regulations that currently exist.
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