Singapore to start taxing foreign sourced income from 2024

Singapore’s Parliament has approved amendments to the Income Tax Act, introducing a tax on foreign-sourced capital gains starting from January 1, 2024.

Key Takeaways

• Singapore will start taxing foreign-sourced capital gains from 2024, marking a significant shift in its tax system.
• The amendments to the Income Tax Act align Singapore’s tax regime with the EU’s Code of Conduct Group Guidance (COGC) and reflect the country’s commitment to fair tax practices.
• These changes are part of the global Base Erosion and Profit Shifting initiative (BEPS 2.0) and demonstrate Singapore’s efforts to maintain a competitive and equitable tax environment in line with international

The tax will apply to capital gains received in Singapore if the entity does not have “economic substance” in the country. The definition of “economic substance” will be determined on a case-by-case basis.

The amendments align with the EU’s Code of Conduct Group Guidance and aim to promote a fair tax system. The tax will only apply to entities that are part of consolidated multinational entities with a place of business outside of Singapore. Financial institutions, entities exempt from income tax, and excluded entities are not subject to the tax.

The changes are part of the Base Erosion and Profit Shifting initiative and Singapore’s commitment to international tax standards. From January 1, 2025, multinational companies with consolidated annual revenues of EUR 750 million or more will be subject to a minimum effective tax rate of 15%.