IRAS updates e-Tax Guide to expand the non-taxation scheme for share disposal gains from 2026.
The Inland Revenue Authority of Singapore (IRAS) issued the updated e-Tax Guide on the Certainty of Non-taxation of Companies’ Gains on Disposal of Equity Investments (Fourth Edition) on 30 September 2025.
The guide explains a tax measure providing upfront assurance that gains derived by companies from selling equity investments will not be taxed, subject to specific conditions.
Key aspects discussed include the qualifying criteria, such as holding at least a 20% shareholding for a continuous 24-month period, and enhancements introduced in Budget 2025, which expanded the scheme to include qualifying preference shares and allowed for the 20% threshold to be assessed on a group basis.
The document also outlines exclusions from the scheme, particularly for divesting companies involved in certain property-related activities, and clarifies that normal tax rules apply to losses and non-qualifying disposals.
Singapore first introduced this scheme in Budget 2012 to give companies upfront certainty that their gains from disposing of equity investments would not be taxed, provided specific conditions are met. The scheme currently applies to share disposals made between 1 June 2012 and 31 December 2027.
As announced in Budget 2025, the sunset date of 31 December 2027 will be removed, and the scheme will be enhanced. From 1 January 2026, the scope of tax exemption will expand to include gains from the disposal of qualifying preference shares, in addition to ordinary shares.
Previously, to qualify for non-taxation, a divesting company had to hold at least 20% of the ordinary shares in the investee company for a continuous period of 24 months before the disposal. Under the new rules effective 1 January 2026, this requirement remains, but the 20% shareholding test can now be applied on a group basis and includes both ordinary shares and qualifying preference shares.
Certain exclusions still apply — for example, if the divesting company is subject to specific tax rules or if the investee company carries out certain activities.
If the scheme does not apply, the tax treatment of gains or losses from equity disposals will continue to depend on whether they are income or capital in nature, determined by the badges of trade and the facts and circumstances of each case. Normal tax rules will then apply.
