Trading Taxes in Singapore
Your tax liability when trading in Singapore depends on several factors, including the frequency and volume of trades. This guide will look at day trader tax laws, implications and rates set out by the Inland Revenue Authority of Singapore (IRAS). It will unpack specific asset rules and offer tips to help manage your obligations, including tax software.
- The Inland Revenue Authority of Singapore (IRAS) is the body responsible for collecting taxes from online trading.
- The end of the tax year in Singapore is 31 December and traders must submit tax returns by 15 April.
- 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
How Trading Taxes Work
Taxes for day trading in Singapore can vary depending on several criteria judged by the IRAS. 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.
Taxes in Singapore are favorable towards long-term investors compared to other major jurisdictions. You do not generally have to pay taxes on capital appreciation gains or dividend income.
This is unlike the US, for example, where you often have to part with a sizeable percentage of your earnings.
The rules around day trading taxes in Singapore are not always clear.
Those required to pay taxes on earnings will be doing so under the progressive resident tax rate. This starts at 0% up until S$20,000 and ends at 22% for those earning above S$320,000.
However, this will depend on the determination of your local tax authority. They will look at a number of factors in deciding whether your activity constitutes day trading for taxation purposes:
- Volume – If you are making a few daily trades then the IRAS may exempt you from tax. However, profits from hundreds and thousands of trades may be liable for taxation.
- Pattern – Do you trade in an organized manner, similar to that of established and full-time traders?
- Sole income – If you day trade on the side, the IRAS may well deem your earnings as capital gains, and not taxable. However, if day trading is your only source of income you will likely have to pay taxes.
- Finance – Do you set aside a specific pot to fund your trade activities? The more methodical you are with your capital for the purposes of trading, the more likely it is you will have to pay taxes.
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.
From the Inland Revenue Authority of Singapore (IRAS) and MOF (Ministry of Finance), 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 guidance from the IRAS on ‘Income Received Overseas’.
Taxes for day trading in Singapore can be mitigated via deductions which can be claimed as regular business expenses. This could be in the form of internet bills, resources, and anything else you use to trade.
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.
Most brokers that facilitate day trading do not have a tax agency. This means they make zero deductions in terms of taxes. The legal responsibility rests solely with the client.
If you are trading forex on the side, all profit is generally tax-free. However, if you have given up your day job to trade currency, you may be required to declare it and pay a portion in taxes.
Interestingly, how trading funds are withdrawn could impact the day trader tax rate. For example, using an electronic payment system, such as PayPal or WebMoney, means that funds will not enter Singapore unless they are transferred into a local bank account.
Thus, funds left within an international payment system are not generally taxable since the IRAS have limited means of locating or accessing them.
If a trader has a particularly challenging financial year, leaving some capital in these systems may protect them from taxes.
If you have doubts or require clarification, seek professional tax advice. Alternatively, contact the IRAS.
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 holding periods.
It is worth pointing out though that the IRAS may be more lenient towards digital currency activities. This is because Singapore has been one of the first nations to defend tokens such as Bitcoin.
The Monetary Authority of Singapore (MAS) announced it will not interfere with people’s ability to transact in Bitcoin. This has been seen by many as support for these digital currencies and has opened up the country as a ‘safe haven’ for cryptocurrency entrepreneurship.
Furthermore, the IRAS has highlighted that digital currencies, such as Bitcoin, Ethereum, and Litecoin, do not fit the definition of ‘money’ or ‘currency’. Instead, they fall under the goods and services umbrella for the purpose of taxes.
For now, it stands that if you trade digital currencies as an investment, your profits and losses will be traded as capital gains. Since Singapore has no capital gains tax for non-property, they will be in effect, exempt from taxes.
Stock taxes are more straightforward. Investors will not typically be liable for capital gains tax when trading stocks in Singapore. On the other hand, traders who meet the requirements outlined above will face some tax implications.
Having said that, day trading shares tax does come with benefits. The Singapore government is trying to encourage Singaporeans to trade equities. This means you can benefit from a concessionary rate on taxes for the first few years.
You could also set up a trading company to benefit from the concessionary corporate tax rate permanently. This will apply to the first S$100K annual income.
Day Trading Tax Preparation
Keep A Record
The end of the tax year in Singapore is 31st December and tax returns must be completed by 15th April.
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:
- Purchase & sale date
- 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.
Strictly speaking, Singapore does not have capital gains taxes. However, intraday profits that are not considered capital gains are income, and therefore may face income taxes.
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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