Taxation
What is annual value?
Annual value is the estimated annual rent that your property can fetch. For example, if your property (without furnishing) can bring in $1,000 a month in rent and this rental is in line with the market prevailing rent, then the annual value will be about $12,000.
The annual value is determined as if your property is let out even though it may be vacant or occupied by you, i.e. owner-occupied. If your property is a piece of land, the annual value is 5% of the market price of the land.
How much tax do I have to pay?
If you own and occupy your residential property, you will pay a concessionary tax of 4% of the annual value. For properties other than owner-occupied dwellings, the tax is 12% of the annual value.
To apply for the concessionary tax of 4%, you have to submit an application form.
What should I do when I receive the property tax notice informing me of a revision in the annual value?
The notice is to alert you that the annual value of your property has been revised and, therefore, the tax on it has also been revised.
If you do not dispute the revision, all you have to do is to wait for the property tax bill and pay the tax.
If, however, you dispute the revision, you must make a formal objection within 21 days of the notice.
How do I make a formal objection?
You can either collect the prescribed objection form from the Inland Revenue Authority of Singapore (IRAS) or call them to have the form sent to you.
The form will help you to give the information which are necessary for IRAS to consider your objection.
Why do I need to pay additional back year tax in some cases?
When you increase the rent on your property, the annual value of your property also changes.
If the original annual value has not been revised to take into account the change, you will have to pay tax dating back to the date of change.
You will also need to pay additional back-dated property tax if you had made the following changes to your property and the original annual value had not been adjusted to reflect the changes:
• Made additions and improvements to your property;
• Completed the construction of your building;
• Demolished the buildings on your land;
• Ceased to occupy the property yourself.
How much income tax do I have to pay on my property, in addition to property tax?
Only homeowners who lease out their properties are required to pay income tax on the rental income received. The rental income declared in your income tax form for the year 1994 would be that received for the whole of 1994.
Example:
Commencement of rental: 15 May 1994
Monthly rent received = $4,000
Declared rental income for 1994 = $4,000 X 7.5 months = $30,000
In determining the expenses which may be deducted from your rental income, you need to distinguish between the following:
• Expenses incurred prior to earning the income
Expenses incurred prior to the commencement of the income generating activity are regarded as pre-commencement expenses and are not allowed as a tax deduction. For instance, the commission paid to the real estate salesperson to secure a tenant is not tax deductible.
• Expenses incurred in earning the income
Fees paid to a real estate salesperson for collection of rent and management of the property are however tax deductible as they are incurred while earning the rental income.
• Expenditure on capital items (eg furniture)
Expenditure on capital items is not tax deductible. However, cost of repairs and maintenance incurred while the property is being rented out are tax deductible. For example, repairs to air-conditioning, replacement of curtains and cushion covers, and repainting.
As a guide, the following are generally tax deductible against rental income:
• Property Tax
• Mortgage interest
• Conservancy fees
• Management agency fee
• Repair and maintenance expenses
• Security costs (e.g. installation of burglar alarm system)
Receipts of all expenses are required to support your claim.
How much stamp duty am I liable to pay when I purchase a property?
As required under the Stamp Duty Act, the stamp duty is calculated and payable in accordance with the sale price. The following is the standard payment scale:
First $90,000 – 1%
Next $60,000 – 2%
Thereafter – 3%
Must I pay GST on my purchase of a private apartment?
No. All transactions, whether it be buying, selling or renting, on residential properties and residential land are exempt from GST. However, GST is payable on furnishing in respect of rental of residential properties.
You also have to pay GST on the real estate salesperson’s commission, if the real estate salesperson belongs to a company registered to collect it. Real estate salespersons or property companies with a turnover of more than $1 million in revenue will collect the GST.
