Tag: Property tax

Lower property tax bill in 2016 for more than 90% of residential owners

On By taxsgIn Latest Tax News, Property Tax

2 December 2015 

In a media release on 30 November 2015, IRAS has stated that more than 93% of residential households will enjoy lower property tax bills in 2016.

Compared to 2015, all HDB flat owners will pay lower or no property tax next year, ranging from 9% to 24% whilst more than 80% of private residential property owners will see tax savings of between 3% to 20%. An estimated 28,200 3-room HDB flat owner-occupiers will not have to pay any property tax.

The decrease in property tax comes after the revision of Annual Values (AV) of properties with effect from 1 January 2015. The AV is the estimated annual market rent of a property as if it was rented out, and is used as a basis to compute the property tax payable.

IRAS has also launched new e-Service – “e-Property Tax Balance” for owners to check tax payable on their properties and whether the payment mode is by GIRO.

A 5% penalty will be imposed for owners who fail to pay or have not arranged to make payment by 31 January 2013. 

Source: IRAS

IRAS issues e-Tax Guides on property tax

On By taxsgIn Latest Tax News, Property Tax Act

10 October 2014

On 2 September 2014, the Inland Revenue Authority of Singapore (IRAS) had issued e-Tax Guides relating to property tax as follows:

  • Guide on shopping centre assessment (replaces the e-Tax Guide, “Guide on shopping centre assessment” published on 16 December 2008.
  • Treatment of en-bloc sale sites
  • Guide for hotel owners and operators (replaces e-Tax Guide, “Property tax: Guide for hotel owners and operators (Fourth edition – November 2010)” published on 24 November 2010.
  • Treatment of fixed machinery under the Property Tax Act
  • Investor’s guide to property tax (replaces the e-Tax Guide, “Investor’s guide to property tax” which was published on 22 June 2006.)
  • Treatment of contributions to management fund and sinking fund
  • Property tax assessment on common property

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

Source: Inland Revenue Authority of Singapore

More progressive tax system expected

On By taxsgIn General News, Goods and Services Tax, Individual Tax, Latest Tax News, Property Tax

25 November 2013

The Straits Times reported on 20 November 2013 that economists expect a more progressive tax system to emerge in Singapore in the next few years that will help lower-income earners, while ensuring higher-income earners are not overburdened. A progressive tax system is one where higher-income earners pay more taxes than lower-income earners.

This follows an earlier report where Acting Minister for Culture, Community and Youth Lawrence Wong was quoted as saying at a community dialogue on 17 November 2013 that the Government is looking at how they can have a more progressive tax system in order to preserve and uphold a fair and just society. Economists interviewed said that the wheels are already set in motion with the measures introduced in Budget 2013 and they believe the trend will continue in next year’s Budget.

Factors fuelling the move towards a more progressive tax system include increased social spending, higher outlays on public infrastructure, an ageing population and the rising income gap.

Possible measures in next year’s Budget may include:

  • Further adjustments in property tax
  • Higher asset tax on second and subsequent properties and cars
  • Reduction in the income tax rate for lower-income brackets
  • Lower income for the highest tax bracket of 20% from the current S$320,000

Economists said that raising the goods and services tax (GST) rate from the current 7% may be an option for the Government to raise additional revenue in future. However, this has to be complemented with more generous rebates to lower-income families as such a tax is regressive and lower-income households will be more affected.

Source: The Straits Times

MOF rejects property tax feedback

On By taxsgIn Latest Tax News, Property Tax

9 September 2013

The Ministry of Finance (MOF) rejected all eight suggestions received on the draft Property Tax (Amendment) Bill 2013 during the public consultation held from 25 July to 14 August 2013, as they were incompatible with the policy intent of the proposed amendments.

Comments were sought for the following tax changes:

  • Do away with property tax refunds for vacant properties;
  • Clarify the definition of residential and non-residential properties for the purpose of introducing a progressive tax structure; and
  • Extend the deadlines for filing objections and appeals on tax assessments.

Six of the eight suggestions received concerned the removal of tax refunds. These include:

  • Lowering the property tax rate or allowing the vacancy refund but limit the claim period for commercial and industrial property owners whose premises are unused;
  • Permitting vacancy refunds for unoccupied dwellings of Singaporeans who are overseas for work or charitable reasons; and
  • Delaying building assessment for property tax until a project achieves a certain occupancy rate or two years after obtaining the Temporary Occupation Permit, whichever is earlier.

The MOF dismissed the above propositions on the grounds that property tax is a tax on ownership and should be levied regardless of whether the property is used or not.

Another idea submitted was to tax rental income at a higher rate. The MOF replied that this was already the case with our progressive income tax structure, since an individual pays more taxes as his total earnings, including rental income, increases. Moreover, a higher property tax rate is also levied on non-owner occupied homes.

Source: Ministry of Finance

Court of Appeal – HSBC Institutional Trust Services (Singapore) Ltd v Chief Assessor – [2013] SGCA 4

On By taxsgIn Case Updates

3 February 2013

Property Tax – Annual value

The Appellant is the trustee of a trust which owns a shopping centre (“the Property”). The Asset Items of the shopping centre consist of escalators, lifts, air-conditioning and fire safety systems installed within the Property. It is common ground that the Asset Items are fixtures.

A sum of $0.20 psf, representing the annual depreciation of the plant and machinery of the Property including, inter alia, the Asset Items, was included in each tenant’s monthly gross rent.

The Appellant sought to exclude the depreciation component in the computation of the annual value of the units in the Property for the purposes of assessment of property tax. However, the Chief Assessor ruled that the depreciation component should be included in the computation of the annual value of the units.

The Valuation Review Board agreed with Appellant but this decision was reversed by the High Court.

The Appellant appealed to the Court of Appeal. The question was whether the High Court Judge was correct to have refused to exclude the depreciation component in the rent paid by a tenant in determining the “annual value” for the purposes of property tax assessment.

The issues before the Court of Appeal were:
(a) what is the proper test for excluding an expense which has been included in the gross rent when determining the annual value of a property, and in particular the relevance of the fixture test and/or the enhancement test in that regard (“Issue 1”); and
(b) on the application of the test determined by Issue 1, whether the depreciation component should be excluded from the annual value of each unit in the Property (“Issue 2”).

“Annual value” is defined in s 2(1) of the Property Tax Act to be “the gross amount at which the same [property] can reasonably be expected to be let from year to year, the landlord paying the expenses of repair, insurance, maintenance or upkeep and all taxes (other than goods and services tax)”.

Two phrases in s 2(1) were analysed. The first being “reasonably be expected to be let from year to year”, and the second being “the landlord paying the expenses of repair, insurance, maintenance or upkeep and all taxes” (other than goods and services tax)”(“the qualifying words”).

On Issue 1,the Court of Appeal agreed with the High Court that the touchstone was whether each component in the gross rent, was related to rent or letting (“the rent or letting test”). This is based on the first phrase in s 2(1). In this regard, the fixture and/or the enhancement tests may be helpful because, as the rent or letting test is about whether the expense is related to the use or occupation of the heritable subject (ie the real property), it follows that expenses related to accepted fixtures, being components of the heritable subject, are related to rent or letting.

The starting point, however, is not to apply the rent and letting test straight away, but to first decide whether the particular expense falls within the qualifying words in the second phrase of s 2(1). If the expense belongs to one of these categories, it has to be automatically included in determining annual value. It is only if an expense does not fall within any of the categories in the qualifying words that the rent or letting test comes into play.

Although the qualifying words represents a closed list, the omission of an expense, such as depreciation, from that list only means that the expense is not to be automatically included in the computation of annual value. If the expense is found to be related to “rent or letting” when applying the rent or letting test, it will still be included in the annual value at the second stage of inquiry.

Depreciation represents the recognition that, even with maintenance, an item which has a certain useful life span will not stay in good repair for an infinite time. Depreciation is therefore not a species of maintenance, and does not fall under the qualifying words.

This then leads to whether the depreciation (which is distinct from maintenance) of the Asset Items, is related to “rent or letting”, ie whether the depreciation component in the tenant’s gross rent is related to the use or occupation of the heritable subject. Applying the fixture or enhancement test, not only are the Asset Items fixtures and a part of the heritable subject, they also clearly and directly enhance the enjoyment of each tenant’s occupation of his unit.

Based on the above, although depreciation did not fall under the qualifying words in s 2(1), it was found to be related to “rent or letting” under the rent or letting test. Accordingly, the Court held that the depreciation component should be included in the annual value of each unit.

As the $0.20 psf representing the depreciation component had already been directly attributed to the Asset items and accepted by the Assessor as a fair and reasonable rate, the depreciation component should, upon payment by the tenants, be immediately included in the assessment of annual value without the need to remit the matter back to the Chief Assessor.

The above judgement was delivered on 17 January 2013.