Income from stocks and securities is considered capital in nature and generally not taxable.
For withholding tax purposes, interest income includes interest, commission, fee, or any other payment in connection with any loan or indebtedness, or any arrangement, management, guarantee, or service related to any loan or indebtedness. It includes interest on overdue trade accounts and interest on credit terms paid to a non-resident supplier or delay in payment for the sale of goods and like payments. It also includes the payments in respect of interest rate or currency swap arrangements, non-financial derivatives such as forwards, futures, swaps, or options, subject to certain conditions.
For withholding tax purposes, the term ‘royalty’ includes payment for the use or right to use the following:
- Commercial, scientific, technical, or industrial knowledge for business activities or hiring a foreign expert to render these skills;
- Any movable property being machinery and plant under a finance lease;
- Software, including payments for downloadable software, the software bundled with hardware, software licenses (e.g., site, enterprise, or network), limited duration licensed software, and software products with online elements;
- Information such as subscriptions to information databases (excluding payments for the use or the right to use patents, trademarks, registered designs, geographical indications, the layout design of integrated circuits, plant varieties, and trade secrets);
- Digitized goods including payments for online or downloadable ringtones, music videos, books, and other similar goods; and
- A copyright which the payer is allowed to exploit commercially. The term ‘commercially exploit’ means to be able to:
- Reproduce, modify, adapt, and distribute the software, information, or digitized goods; and
- Prepare derivative works based on the copyrighted software program, information, or digitized goods for distribution.
If partial rights are licensed to a company in Singapore for the use of copyrights, patents, trademarks, etc., the income will be treated as a royalty payment. However, if the rights are sold, it will be treated as business income If a license is only for operational use and cannot be exploited commercially, income in relation to the license will not be deemed Singapore sourced and will not be taxable as royalty income (see further Sec. 8.2.3.).
Leasing and the rental income derived from real property is considered normal business income and will be taxable.
Income from the provision of technical, consultancy, and similar services is considered service income and will be taxable if provided in Singapore, as covered above. If rendered wholly outside Singapore, such service income is not taxable. See further Sec. 8.2.3.
For withholding tax purposes, the term ‘service fees’ includes:
Remuneration for the rendering of assistance or service in connection with the application or use of scientific, technical, industrial, or commercial knowledge or information.
Payment for services such as installing equipment, technical support, training, consultancy, and other work in Singapore; and
Remuneration for management services including management, or assistance in the management of any trade, business, or profession.
While capital gains are normally not taxed, they may be considered business income if property trade is a primary business. Whether trade is a primary business can be induced from various factors, such as repetitive trading or length of holding period.
The Singapore tax authority has published an e-tax guide on the income tax treatment of transactions involving digital tokens. A digital token refers to any cryptographically secured digital representation of value that can be transferred, stored, or traded electronically. The guide provides the following:
- A payment token is considered as an intangible property as it does not have a physical form. Transactions involving these tokens are treated as barter trade, and the value of goods or services transferred is determined at the point of transaction and taxed on the value of the underlying goods provided/services performed. A deduction for the goods purchased or services received is allowable, subject to general deduction rules;
- A utility token holder has a specified or implied right to use or benefit from goods or services in exchange for that token. The amount incurred by the user to purchase the relevant utility token is treated as a prepayment. Subject to tax deduction rules, a deduction is allowed on the amount incurred at the point the token is used to exchange for the goods or services; and
- A security token comes with a specified or implied degree of control or economic entitlement and in tokenized form of traditional securities or in the form of any other securities or investment assets/instruments. The nature of a security token would depend on the rights and obligations tied to that token. The nature of the returns derived by the security token holder could be interests, dividends, or other distributions and be taxed on the security token holder accordingly. Where the security token is disposed by the holder, the tax treatment of the gain/loss on disposal depends on whether the security token is a capital or revenue asset to the token holder, and accordingly, whether the gain/loss is capital or revenue in nature.
Income from the sale of carbon credits is taxable depending on the facts and circumstances of each case. For a trading company, income arising from the sale of carbon credits will be revenue in nature. For a company that procures carbon credits for its business use but sells them subsequently, the income derived from the sale will be considered as taxable business income.