The Inland Revenue Authority of Singapore has clarified that the disposal of a company’s office property to a related party constitutes a capital transaction and will not be treated as taxable trading income.
The Inland Revenue Authority of Singapore (IRAS) has published Advance Ruling Summary No. 4/2026 on 2 March 2026, addressing whether the sale of a company’s property should be regarded as a capital transaction rather than taxable trading income.
The ruling considers the disposal of property owned by Company A, which is incorporated in Singapore and carries on business in the jurisdiction. Company A owned several floors of a property that it had acquired for use as its office premises. The company maintained this intention consistently and substantially used the property for its own operations since the acquisition.
The acquisition of the property was not funded through any loan or debt financing. At the time of purchase, the property was recognised as Property, Plant and Equipment under Financial Reporting Standard 16.
Company A subsequently sold the property to Company B, a related party. The disposal was undertaken with the intention that the financial resources tied up in the property could be used to improve Company A’s solvency position.
IRAS considered the matter under Section 10(1) of the Income Tax Act 1947 and concluded that the sale constitutes a capital transaction.
In reaching its decision, the tax authority evaluated several factors, including Company A’s intention when acquiring the property, the manner in which the property was used, the holding period, and the mode of financing.
The ruling confirms that the proceeds from the sale will not be treated as taxable trading income.
