We thank Mr Yeo Chee Kean for his feedback ("Tax rule on property traders lacks clarity"; 18 Feb 2014). We would like to take this opportunity to explain how IRAS determines the taxability of gains from the disposal of properties although IRAS had earlier informed Mr Yeo on the basis of our assessments.

Singapore does not have a capital gains tax. However, gains from the disposal of property are considered as taxable income in certain circumstances. IRAS will study the specific facts of such cases and use the widely accepted “Badges of Trade” yardstick to determine whether the gains are income in nature. This yardstick includes the following factors that will be considered in totality:

1. intention of purchasing the property;
2. length of property holding period;
3. frequency and volume of similar transactions;
4. improvements made to the property to better attract buyers; and
5. financing arrangements of the property.

It is only right for taxpayers to pay their fair share of taxes should the facts and circumstances show that the gains made by a taxpayer from selling his property are trading gains or revenue in nature.

IRAS reviews property-related transactions (especially those with short holding periods) as well as rental income information to ensure that such income have been properly declared and taxed accordingly. We would like to remind taxpayers to declare all income correctly when filing their income tax returns.

Walter Lim
Director (Corporate Communications)
Inland Revenue Authority of Singapore