Are profits from FOREX Trading taxable in Singapore?

Is the income from FOREX trading taxable in Singapore? In fact, what about the profits from other financial instrument (binary options, futures, etc.)?

For anyone currently or is interested to enter Forex trading, I hope you’ve at least given this question a thought as it proves that you’re in it for the long term. This post will help you answer some of the questions I have myself when I started getting serious in FX trading! And save you some time looking around the web 🙂

Is Forex Trading Taxable by AuthoritiesAfter heck of research online to check out if my profits from Forex Trading are taxable, I have came out with a couple of conclusions and findings. It’s quite obvious that consistent FX traders will start to get curious about if they would be taxed of their income or if there are any regulations to income from trading these instruments:

http://www.expatsingapore.com/forum/index.php?topic=43834.0
http://forums.hardwarezone.com.sg/money-mind-210/forex-profits-subjective-tax-3158295.html
http://fx-knight.com/smForum/index.php?topic=1754.0
http://forums.hardwarezone.com.sg/money-mind-210/oanda-sg-3175856.html
http://forums.hardwarezone.com.sg/money-mind-210/any-full-time-traders-4662172.html
http://forums.sgclub.com/singapore/new_forex_want_134980.html

 

The conclusion?

To simply put, yes and no. It’s definitely a grey zone if you’re trading full time for income (or if you trade by thousands of lots frequently), in which IRAS will have the final say in that case…
However, if you were to treat it as a ‘side/supplementary income’, it will not be taxable as it will then be considered a personal investment! (one good factor to trade in Singapore 😉

As stated by IRAS:

Gains from Sale of Shares and Financial Instruments
Generally, profits or losses derived from the buying and selling of shares or other financial instruments are viewed as personal investments.
These profits are capital gains and are not taxable. You need not report such gains in your tax return.

When is it taxable
To determine whether an individual is trading, factors such as the frequency and volume of transactions, the interval between the purchase and sale, and the manner of financing the purchase of shares, will be taken into consideration.
The three circumstances factors above alone do not determine whether the gains are taxable.

https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/What-is-Taxable-What-is-Not/Gains-from-Sale-of-Property–Shares-and-Financial-Instruments/

As stated by MOF:

Tax Treatment of Singapore-Sourced Investment Income
The following Singapore-sourced income derived by any individual on or after 1 Jan 2004 will be exempt from income tax:
i. any interest from debt securities;
ii. any discount from debt securities which mature within one year from the date of issue of those securities;
iii. any income from an annuity, except income from –
A. any annuity purchased by the employer of an individual in lieu of any pension or other benefit payable during his employment or upon his retirement; and
B. any annuity purchased under SRS;
iv. any income from any life insurance policy, except any sum realised under any insurance against loss of profits;
v. any distribution made by any collective investment scheme constituted as a unit trust (including real estate investment trust) authorised under section 286 of the Securities and Futures Act (Cap. 289), that is income or deemed to be income of the individual, except distributions made out of Singapore dividends from which tax is deducted or deductible under section 44; and
vi. any fee or compensatory payment from securities lending or repurchase arrangements.

http://www.mof.gov.sg/MOF-For/Individuals/Tax-Treatment-of-Foreign-Source-Income-and-Singapore-Investment-Income

 

Let’s step up the game. Now, what if you use an overseas brokerage?

Again, what if you use an overseas brokerage or financial institute for your trading and gained a huge sum of profits? Are they taxable at all? Do you have to report anything?
Based on Inland Revenue Authority of Singapore and Singapore Ministry of Finance, it seems like all personal investments and income received on or after 1st January 2004 are exempted from income tax. You don’t even need to declare them. Sounds like a plan, guys? 😛

As stated by IRAS:

Taxable and Non-Taxable Income
All income earned in or derived from Singapore is chargeable to income tax.
Generally, overseas income received in Singapore on or after 1 Jan 2004 is not taxable, except in some circumstances. Please refer to Overseas Income Received in Singapore for more details.

Income earned may come from different sources such as:
– Employment
– Trade, Business, Profession or Vocation
– Property or Investments
– Other Sources (e.g. annuities, royalties, winnings or estate or trust income)

https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/What-is-Taxable–What-is-Not/

As stated by MOF:

Tax Treatment of Foreign Source Income
Any income arising from sources outside Singapore and received in Singapore on or after 1 Jan 2004 by an individual (other than partners of a partnership) is exempt from income tax.

http://www.mof.gov.sg/MOF-For/Individuals/Tax-Treatment-of-Foreign-Source-Income-and-Singapore-Investment-Income

 

Been around a month since my last post as I thought of writing more meaningful and informative posts where readers will learn and feel something new every time. Hope this does it? Haha. Comment and subscribe to this blog to receive my next post in your inbox straight away, for free 🙂

And lastly, hope you have had a great weekend! Happy Vesak Day !

Regards,
The Independent Abecedarian

6 thoughts on “Are profits from FOREX Trading taxable in Singapore?

  1. Hi, I’m sure to a certain degree that foreign income are tax at the point they are remitted into Singapore as far as trade income is concern.

    So if badges of trade applies to fx that makes your income to be class as taxable. The same would apply to your fx trade done overseas. The only difference is that your income will only be taxed when you receive the fund into Singapore.

    1. Hi Max,

      Thanks for dropping by. Based on your message, do you mean that ‘overseas trading’ incomes should be declared? If so, I net profit or gross income? I believe it will be extremely difficult and tedious for IRAS to check on each trader’s trade histories.. Like how would IRAS be then able to cross check the exact profits you’ve earned via your overseas brokerage (do they account commissions, spreads, account interests, swap rates, etc. in FX Trading for example)? You could withdraw part of our profits, will they tax them pro-rated then?

      Or if as you said that they would tax us once we transfer the money back into Singapore, what if we made a loss and transfer the leftovers back? Do IRAS know if those monies are profits or your leftover capital?

      I appreciate your message but I am very curious on how the government will be taxing us, if any, as there will surely be loopholes if they tax some and not the others, making the law arbitrary.. :-/

      Regards,
      The IA

  2. Hi it is not taxable. I have personally emailed IRAS to clarify and here is the reply from a Senior Tax Officer,

    We wish to inform you that profits or losses derived by an individual from the buying and selling of financial instruments on his own account are viewed as personal investments.

    If the individual buys and sells financial instruments as a profit, the profit is not subject to tax as it is a capital gain. He does not need to report the gain/losses in his income tax return.

    1. Hey Ethane,

      Awesome, I guess you got it right there and elucidated this post totally!
      So I assume even a full-time trader does not need to report his gain/loss if he trades only for himself, with his own capital?
      Appreciate your sharing 🙂

      Regards,
      The IA

    1. Hi Ethane,

      Awesome. Thank you for letting us know and at least we now know there’s no need to hide. 😉

      Regards,
      The IA

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