The Court of Appeal in Singapore confirmed a decision of the High Court, finding that shares that an insurance company held in three other entities (i.e., core shares) were capital assets. Thus, the gain on disposal of these shares was capital and not subject to tax.
In the case of :Comptroller of Income Tax v. BBO (2014) MSTC ¶70-029 the Court looked at the taxability of the investment gain made by the taxpayer (an insurance company) in three entities and considered, among other items, the special rules under Singapore’s insurance law. The Court of Appeal observed that the question whether certain investment gains were properly attributable to revenue or capital account is ultimately a question of fact.
While the Court of Appeal accepted that the nature of the insurance business ordinarily would give rise to an inference that the gains arose out of a plan for profit-making, absent evidence to the contrary, a general principle is that whether gain is capital or revenue in nature—even when the taxpayer is an insurance company—must be determined under applicable law and facts. No industry is to be singled out for differing tax treatment on the basis of regulatory requirements. The Court found that the shares were capital assets and the insurance company was therefore not subject to tax on their disposal.
