Singapore has rules requiring some traders to pay taxes depending on specific criteria. The rules are nuanced—many consider them a subjective grey area with little clarity.
In this article, I aim to clarify the Singaporean tax rules for traders by walking through the guidelines issued by the country’s tax collecting authority, the IRAS. I will also cover how Singapore regulates Forex as well as the payment methods traders can access.
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Qualifying to Pay Tax for Forex Trading
The first step is to confirm whether you qualify as a tax resident in Singapore. The IRAS rules on this matter are clear, making it easy for anyone to know the answer.
The IRAS Rules on Tax Residency
According to the Inland Revenue Authority of Singapore (IRAS), you will be treated as a tax resident for a particular Year of Assessment (YA) if you are a:
- Singapore Citizen or Singapore Permanent Resident who resides in Singapore except for temporary absences; or
- Foreigner who has stayed/worked in Singapore:
- For at least 183 days in the previous calendar year. Or:
- Continuously for three consecutive years, even if the period of stay in Singapore may be less than 183 days in the first year and/or third year. Or:
- Foreigners who have worked in Singapore continuously over two calendar years, with a total stay of at least 183 days. This applies to employees who entered Singapore but excludes company directors, public entertainers, or professionals.
Non-tax residents may be subject to taxes under specific scenarios but at rates different from tax residents.
Qualifying to Pay Tax on Trading Profits—"Badges of Trade”
The IRAS uses a set of criteria known as “Badges of Trade” to evaluate if the transactions fall under their definition of profit-seeking, and therefore taxable. The criteria consist of the following:
- Nature of the asset: Assets commonly associated with for-profit trading include Forex, stock market trading, and certain real estate.
- Holding period: This is the period from purchasing an asset or opening a trade to selling or closing the trade. Shorter holding periods, e.g., less than six months, typically lead to the IRAS assessing the transactions as taxable.
- Frequency of transactions: The higher the number of transactions or trades, the more likely the IRAS will consider them taxable. For example, the IRAS would more likely tax someone opening and closing trades multiple times in one year.
- Purpose of the transaction: Was the asset used for its intrinsic purpose or as a speculative asset? For example, I might enter a Forex transaction because I’m importing or exporting goods, and any gains are not taxable because they are part of a capital transaction. However, if I am trading Forex purely to profit from the change in the value of currencies, then the IRAS will consider that a profit-seeking motive.
Other Badges of Trade conditions are related more to real estate or physical goods, such as the extent of enhancement work (e.g., property renovations), circumstances behind the sale (e.g., asset liquidation caused by business decline), and mode of financing (e.g., assets bought with short-term funding are more likely to attract taxation).
What Are the Tax Rates for Forex Trading Income in Singapore?
Resident Tax Rates
Personal income tax returns are mandatory for annual income over SG $20,000. Tax residents do not need to pay tax if their annual income is less than SG $20,000. Singapore has a progressive income tax system, i.e., the tax rate rises at higher income levels. Let’s go through the different income levels:
Income Band | Tax Rate on Band | Tax Incurred on Lower Band(s) |
$0 - $20,000 | 0% | - |
$20,000 - $30,000 | 2% | - |
$30,000 - $40,000 | 3.5% | $200 |
$40,000 - $80,000 | 7% | $550 |
$80,000 - $120,000 | 11.5% | $3,350 |
$120,000 - $160,000 | 15% | $7,950 |
$160,000 - $200,000 | 18% | $13,950 |
$200,000 - $240,000 | 19% | $21,150 |
$240,000 - $280,000 | 19.5% | $28,750 |
$280,000 - $320,000 | 20% | $36,550 |
$320,000 - $500,000 | 22% | $44,550 |
$500,000 - $1,000,000 | 23% | $84,150 |
$1,000,000 | 24% | $199,150 |
Non-Resident Tax Rates
Non-residents are taxed at a flat rate of 15% on their employment income or at resident rates, whichever results in a higher tax amount.
Other types of income, such as directors’ fees, are taxed at 24%.
Singapore Forex Legislation
Several pieces of legislation impact retail traders:
Maximum Leverage on Forex
The Monetary Authority of Singapore (MAS) stipulates maximum leverage on Forex of 20:1 or 50:1 for “accredited investors.” To qualify as an accredited investor, one must have personal assets of more than $2m, or at least $1m in cash, or earnings of more than $320,000 a year.
Segregated Accounts
The Monetary Authority of Singapore’s Securities and Futures (Licensing and Conduct of Business) Regulations obliges brokers to hold client money and assets in accounts separate from their money and assets. This is known as “segregated accounts.” I always recommend using a broker covered by such legislation because it protects assets if the broker goes out of business.
Singapore Financial Regulators
Monetary Authority of Singapore (MAS)
The Monetary Authority of Singapore (MAS) is Singapore's central bank and financial regulatory authority. It issues regulations covering money, banking, insurance, securities, and the financial sector. It also issues the Singapore dollar and manages the country’s foreign exchange reserves.
MAS’s authority extends to Singapore’s Forex industry. Amongst other things, MAS stipulates maximum leverage and how brokers must hold client funds in segregated accounts.
Checking a Broker’s MAS Registration
The best Singapore brokers will be regulated and will confirm on their websites (often at the bottom of the home page) that they are regulated by the Monetary Authority of Singapore. Anyone can verify a broker’s regulatory status on the MAS’s financial institutions directory here.
Singapore Forex Payment Methods
Different brokers will have different methods for clients to deposit funds. Some of the more popular methods include:
- Debit card
- Credit card
- HSBC’s Fast Payment System (FPS)
- DDA Fast deposit for DBS/POSB account holders
- Wire transfer
Some of these methods may be free, and others may incur a cost. Check with your broker and bank first.
How Much Trading Income Is Tax-Free in Singapore?
There are two answers to this question:
- If your trading income does not qualify as taxable under the IRAS’s Badges of Trade criteria, then it is all tax-free.
- If your total income is under $20,000, you will not have to pay income tax even if your trading income qualifies for tax under the IRAS’s Badges of Trade.
Tax Benefits and Exemptions in Singapore
Forex losses, which are not part of a business are generally not tax deductible in Singapore.
Tax benefits, reliefs (exemptions), and rebates are highly specific to an individual’s circumstances, with many contributing factors to whether someone qualifies, and the IRAS and Singapore government often update the conditions. The best source to know if you qualify for special tax treatments is from the IRAS’s tax relief and rebates page here.
Taxation Tips for Forex Trading in Singapore
- Are your Forex gains more than income from other sources, such as your job? Some Singaporean commentators recommend using a general rule that if trading profits are greater than other sources of income, i.e., trading becomes the bulk of your income, it’s time to declare that income to the IRAS.
- It's always a good idea to consult a tax professional to get advice based on your situation.
Bottom Line
Unlike many other developed economies, Singapore has no default capital gains tax structure. Rather, Singapore may tax some trading activity if it falls under certain parameters known as the “Badges of Trade.” The criteria include the existence of a profit-seeking motive, the number of transactions, the nature of the asset, the existence of similar trading transactions, and the interval between purchase and sale (i.e., the holding period). If a Singaporean tax resident passes the Badges of Trade test, they must pay tax on their trading income, so long as their total income is over SG $20,000.
