12 June 2015

This e-Tax Guide explains when and how an individual can opt to deduct an amount of deemed expenses, as a proxy for the actual amount of deductible rental expenses incurred, against his or her rental income.

Generally, rental income derived from the letting of a property is liable to tax under section 10(1)(f) of the Income Tax Act (“passive rental income”). The net amount of rental income subject to income tax will be the balance of the gross passive rental income after deducting allowable expenses such as property tax, repairs and maintenance, fire insurance, mortgage interest etc., incurred to produce the rental income.

To simplify tax filing and ease the burden of record keeping for taxpayers, it was announced in the Budget 2015 that with effect from YA 2016, an individual may opt on a yearly basis to deduct an amount of deemed expenses, in lieu of the actual amount of deductible expenses incurred, against his passive rental income from the letting of a residential property in Singapore. An individual who has opted to deduct an amount of deemed expenses against his rental income can, in addition, make a claim for deduction on allowable interest expenses, if any.

The amount of deemed expenses allowable in respect of a residential property is 15% of the gross rental income. This amount of deemed expenses is considered to be generally in line with the amount of common rental expenses that a landlord will incur.

If an individual has more than one tenanted residential property, he or she cannot opt to claim actual allowable expenses incurred for some tenanted residential properties and an amount of deemed expenses for other residential properties in the same YA.

An Individual cannot opt to deduct an amount of deemed expenses against any rental income if:

• There were no deductible expense (excluding interest expense) incurred in the production of the rental income.
• The rental income was derived through a partnership.
• The rental income was derived from a property held under a trust.

An individual who has made a claim for deduction of actual rental expenses against his passive rental income is required to keep the relevant records of the expenses claimed for a period of 5 years from the YA to which the claim relate.

The e-Tax Guide was published on 5 June 2015.

For full details, please refer the e-Tax Guide on the IRAS website.

Source: This article was extracted from the Inland Revenue Authority of Singapore’s (IRAS) website. Visit http://www.iras.gov.sg/ for more information.