Singapore: Tax exemption for gains realised on disposals of shares extended, if not involving property development

An extension to the tax exemption available under Section 13Z has been enacted into law

An extension to the tax exemption available under Section 13Z has been enacted into law

An extension to the tax exemption available under Section 13Z has been enacted into law, but the provisions have been narrowed with regard to certain property-related businesses and real estate transactions.

As guidance for the legislative changes, the Inland Revenue Authority of Singapore reissued the relevant e-Tax Guide, Certainty of Non-taxation of Companies’ Gains on Disposal of Equity Investments (Third Edition).


Gains of a capital nature are not taxable in Singapore, whereas gains of a revenue nature are taxable at the prevailing corporate tax rate of 17%.

Section 13Z introduced a tax exemption for gains realised by a divesting company in certain situations, provided that the holding is at least 20% of the ordinary share capital for a continuous period of at least 24 months.

Legislative changes

The 2020 budget announced changes to the application of Section 13Z in relation to “property development.” Effective 1 June 2022, the tax exemption under Section 13Z is no longer available with regard to the disposal of non-listed shares when the investee company is in the business of:

  • Property development (including nominated construction activities)
  • Trading in immovable property
  • Holding of immovable property that derives no income or derives passive income (regardless of the location of the immovable property)

The meaning of “property development” for these purposes includes the construction of any building, or part of a building, the acquisition of land or building for such construction, structural changes made to a building when additions and alternations are made, etc. Such work projects are limited to those that require the approval of the Commissioner of Building Control under the Building Control Act (Cap. 29) or (if carried out in a country outside of Singapore) would have required such approval if it had been carried out in Singapore.

Section 13Z application

Still, the tax exemption under Section 13Z may still apply for certain investee companies when:

  • Immovable property developed by the company is used in the conduct of its own trade or business (for instance, a self-developed industrial building used to carry on a manufacturing business, or a commercial building developed to carry on a business of letting out the units).
  • The company did not undertake any property development in Singapore or elsewhere for at least 60 consecutive months before disposal of the shares.

KPMG observation

Real estate fund managers, real estate development companies or operating companies that deal with immovable property in their trade or business need to consider the application of the new rules under Section 13Z. For taxpayers engaged in “property development” in Singapore or abroad, they need to determine whether any such activity is subject to the new rule limiting application of Section 13Z, since what may have previously been a tax-free disposal could be caught by this new rule.

The legislative change is expected to have broad application, so that businesses with properties subject to a regular refurbishment program (for instance, hotels) now may need to consider if any structural changes to currently owned properties could be considered to be “property development” and thus subject to the new rule limiting the tax exemption on disposals of shares.

Read a May 2021 report [PDF 327 KB] prepared by the KPMG member firm in Singapore


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