‘Economic substance’ matters in taxing of foreign asset sales

“SINGAPORE does not tax capital gains” – while this is often cited as a positive feature of Singapore’s tax regime, soon it may no longer be true in certain instances.

On Jun 6, the Ministry of Finance (MOF) issued a call for public feedback on the draft Income Tax (Amendment) Bill 2023. It flagged a key proposed amendment: to tax gains from the sale of foreign assets that are received in Singapore by businesses “without economic substance” locally.

While this proposed revision can result in additional taxes, it is not necessarily an attempt to increase Singapore’s tax base, and should not be conflated with the government’s ongoing study of introducing a global minimum tax.