In the October release of the Real Estate Sentiment Index, an index which is devised by the Real Estate Developers’ Association of Singapore together with the National University of Singapore’s Department of Real Estate, researchers are optimistic about the present and future situation of the Singapore property market.While owning a property is a savvy way to create wealth and have asset diversification, a property owner must be well-aware of the accompanying property obligations including tax responsibilities they have to comply with.
Below is a quick guide on the Singapore’s property tax regime.
What is property tax?
Property tax in Singapore is a tax levied on property owners by the Inland Revenue Authority. This tax is applied regardless of whether the property is being occupied by the owner himself, is being rented, or is being left vacant.
It is to be highlighted that property tax differs from the personal income tax. This is because income tax is applicable on a person’s earnings which can include the income earned from renting out a property.
What are the property tax rates?
For residential properties, whether they are owner-occupied or non-owner occupied, the property tax rates are applied on a progressive scale. This means that the higher the value of the residential property, the higher the tax rate. In the case of owner-occupied residential properties, property taxes range from 0% to 16%. In the case of non-owner-occupied residential properties, property taxes range from 10% to 20%.
For non-residential properties, which can be commercial buildings, industrial buildings, or land, a property tax rate of 10% of the Annual Value is levied.
How is the Singapore property tax calculated?
In order to know the amount of property tax to be paid, the Annual Value of the property is multiplied by the prevailing property tax rate. The Annual Value of a property is based on the market rental price of similar properties in the same neighbourhood. It is to be noted that the Annual Value of the property changes over time with the value decreasing, increasing or remaining the same depending on the real estate market forces.
What are the property tax reliefs available?
For a person staying in his property or a married couple staying in their home, the owner-occupier tax rates are applicable which range from 0% to 16%. The aim of this tax rate is to promote home ownership in the Lion City.
Should a married couple own two properties, the owner-occupier tax rates will only be applicable to one of the homes. It is to be highlighted that the buyers of Housing Development Board (HDB), Design, Build and Sell Scheme (DBSS) flats as well as Executive Condominiums (EC) automatically enjoy the owner-occupier tax rates. This automatic inclusion is also applicable to buyers, who are Singapore citizens or permanent residents, of private residential properties, provided that the spouse is not already benefiting from the owner-occupier tax rates on another property.
House owners whose home has been torn down and reconstructed for owner occupation, can apply for Building Land Remission. This refers to a remission of property tax of up to two years. During this period, the house owner can still benefit from the owner-occupier tax rates while his property is being under construction.
A person, who has bought land with the intent of building a house and living in the property thereafter, can apply for the Vacant Land Remission. This means that the property will benefit from owner-occupier tax rates during the time that the property is being constructed, with a time allowance of up to two years. In order to qualify for the Vacant Land Remission, the land must neither be occupied nor have any rental or fee being received for its use. In addition, the owner or the spouse must not be benefiting from the owner-occupier tax rates on another property during the remission time frame. Moreover, the house must be lived in by the owner for at least one year after the Temporary Occupation Permit date is being granted or the Certificate of Statutory Completion is being received from the Building Authority. It is also to be noted that the land’s Annual Value should be less than S$190,000.
The property tax in Singapore collected along with other taxes is being used to fund the country’s development in areas such as infrastructure, healthcare, defence, education and recreation.
With regards to a non-residential property, a S6(6) Building Exemption is applicable if the property is being used by a registered charity for charitable, public religious worship or education reasons. The S6(6) Building Exemption should be applied and addressed to the Comptroller of Property Tax.
What happens if there are changes to the property?
In the event that a person sells his property, he should first check that he has already paid his outstanding property tax and made any necessary payment. The seller should make all the property tax relief claims at least six weeks prior to the transfer of the property. The seller and the buyer should also ensure that the property tax liabilities are being apportioned. When there is a property transfer, IRAS should be notified accordingly.
If an owner plans to rent his property, all lease documents will need to be e-stamped and therefore IRAS will be notified. The owner should verify that the tenant(s) e-stamps the rental agreement, failing which, a fine of up to S$5,000 can be imposed and an interest on the tax can be levied.
E-stamping refers to the online portal whereby a person can view and manage one’s stamp duty transactions with IRAS. The owner will no longer be able to benefit from the owner-occupier tax rates and will need to start to pay income tax on the rental income earned. Should the owner stop to rent out his property, the owner-occupier tax rates can be reinstated.