11 March 2013
A new e-Tax guide has been issued for companies, partnerships and individuals (“property developer[s]”) carrying on property development activities, which comprise the development of land parcels into residential, commercial and industrial properties for sale, usually prior to the completion of the properties. A property development project can be for residential and/or commercial or industrial purposes.
The guide provides guidance in relation to the tax treatment of property sales and the deductibility of development and related expenses as well as other revenues of a property developer. It also explains the administrative concession relating to a “single-project company”.
Taxable profits and deductible expenses from property development sales
The guide specifically covers :
• the basis of recognition of taxable profit of a property development project
• the treatment of income accrued and expenses incurred before and during development of lands/ properties
• the tax treatment of the following provisions: diminution in value of land; warranty or defects liability; diminution in value of unsold properties of completed projects; liquidated damages for late completion; and compensation for shortfall in floor area, and
• the bases of allocation of land and development cost for the computation of taxable profits of property units that are for sale in the case of a mixed-use development project
Other taxable revenues
The guide also discusses the tax treatment of the following other types of income:
• gains from sale of land/ uncompleted development project
• the rental income from letting out of unsold properties
• the following income from related party transactions
– the discount given on sale of property units to employees
– the rental from property units rented to an employee or related entities’ employees
– the sales proceeds or rental from property units sold or rented to related parties (other than employees or related entitles’ employees)
• the rental income derived from developed properties for long-term investment, and
• the rental income derived from developed properties if the property developer is ascertained to be in the business of making investments
Administrative concession relating to a “single-project company”
Also covered in the guide is the administrative concession granted by the IRAS to a single-project company on a case-by-case basis. This concession allows post-completion development costs, business running costs, capital allowances and trade losses claimed/ incurred after the TOP year of assessment (YA) to be carried back and set off against the assessable income of the last taxable YA up to TOP YA.
More details can be found in the new e-Tax guide “Income Tax: Taxation for Property Developers” available on the IRAS website.
Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website. Visit http://www.iras.gov.sg for more information.