THE Ministry of Finance is seeking public feedback on proposed changes to the Property Tax Act.

The proposals are aimed at improving tax administration and providing greater clarity to taxpayers, the ministry said in a statement yesterday.

A total of 12 changes have been proposed in the draft Property Tax (Amendment) Bill.

One proposal is to streamline reporting requirements of property owners by removing the obligation for them to inform the Inland Revenue Authority of Singapore of certain events, such as when a building is completed, rebuilt, enlarged, altered or improved.

Another proposal is to shorten the time for the tax authorities to recover outstanding property tax and refund excess property tax paid from six to five years.

This is in line with the term applying to income tax and goods and services tax.

The ministry also suggests that interest payable on the refund of excess funds pursuant to court orders be computed from the date of the order – similar to income tax matters.

At present, the Property Tax Act does not specify how interest in such matters is to be computed.

The public feedback exercise started yesterday and ends on June 25.

Consultation documents can be accessed at the ministry’s website and the Reach consultation portal.

Source: Straits Times, 12 Jun 2010

THE Ministry of Finance (MOF) yesterday launched a public consultation to seek feedback on proposed changes to the Property Tax Act.

There will be 12 suggested changes in the draft Property Tax (Amendment) Bill 2010. They are the result of periodic reviews of the property tax system, and ‘aim to improve tax administration or provide clarity to taxpayers’, MOF said in a release.

One proposed amendment will streamline reporting requirements for property owners – they will no longer need to inform the taxman about certain events, such as when a building is completed or rebuilt.

Another suggested change will allow the Comptroller of Property Tax to recover property tax for redevelopment sites prior to the current year, subject to a time-bar limit of five years.

The public consultation exercise will end on June 25. Consultation documents and explanations for the draft bill are available at MOF’s website and the REACH consultation portal.

Source: Business Times, 12 Jun 2010

MR DENIS Distant said that the benefits of the new progressive property tax may not last long if IRAS starts revaluing the Annual Value (AV) of properties (BT, Feb 26, ‘Property tax boon may be short-lived’).

Property tax is a tax levied on the ownership of property, based on the AV of the property. AV reflects the prevailing market rentals of properties. The tax payable will thus increase with an increase in market rentals and vice versa.

IRAS will only adjust the AVs of properties if the market rental data support such revisions. Currently, owner-occupied residential properties are taxed at a flat 4 per cent.

With the progressive property tax schedule, properties with an AV of less than $77,000 will pay less property tax compared to the current flat 4 per cent rate.

This is because the first $6,000 of AV is exempt from property tax. Even with future increases in AV, most owner-occupied properties will still pay lower tax under the new regime so long as their AV does not exceed $77,000. (As a reference, all HDB flats have AVs of not more than $11,000 currently.)

Only about 3 per cent of private owner-occupied residences now have AVs in excess of $77,000. Even then, our property tax rates will remain lower than in most international cities, even for the high-end properties.

Deanna Choo
Director (corporate communications)
IRAS

Source: Business Times, 4 Mar 2010

I REFER to the revision of the property tax rate on owner occupied properties which has the effect of reducing by $240 the property tax currently paid by the majority of homeowners, based on exemption of tax on the first $6,000 of annual value (AV) which at present attracts tax at 4 per cent.

The benefit of the rate change, alas, may not last long if the IRAS starts revaluing the AV on the grounds that the property market has been unusually strong of late and likewise for rentals. If AV increases by $6,000, there goes the $240.

In revising AV, it should be borne in mind that to the owner occupant, even a doubling of notional rental makes no difference in terms of income.

Denis Distant

Source: Business Times, 26 Feb 2010

More progressive system will benefit more owners, won’t hit high-end demand

MOST market watchers have welcomed Finance Minister Tharman Shanmugaratnam’s move towards a progressive property tax regime for owner-occupied residential properties as a fairer system.

Currently, owner-occupied residential properties are taxed at a flat rate of 4 per cent of annual value (AV) or the estimated annual rent of a property, excluding the rent for furniture, fittings and service charge.

But for property tax payable on such properties from January 2011, there will be three tiers of tax rates. The first $6,000 of AV will be exempted from property tax. The next $59,000 AV will be taxed at 4 per cent and the balance of AV above $65,000 will be taxed at 6 per cent.

‘The new system … will benefit most Singaporeans … all HDB flat owners and the large majority of private property owners will pay lower taxes compared to the current system,’ Mr Tharman said.

‘…our property tax rates, even for the high-end, will remain lower than in most international cities. That is as it should be, so that we remain a vibrant and attractive place for businesses and individuals,’ he added.

All owner-occupied homes will enjoy tax savings of $240 as a result of the exemption of the first $6,000 of AV, according to Mr Tharman.

‘Owners of high-end properties with AVs of more than $77,000 will see a small increase in tax payable, as their effective tax rates will be higher than the current 4 per cent. They comprise the top 3 per cent of private owner-occupied residential properties, or the top 0.4 per cent of all owner-occupied homes in Singapore.

‘Homes with AVs of about $80,000 will face only a small increase in tax, of slightly less than $100 per year. A property with an AV of $150,000, which typically is a large property in the central districts and is within the top 0.5 per cent level of private owner-occupied homes, will face an increase in property tax of about $1,500 per year,’ he added.

The move will cost the government about $230 million a year initially.

Knight Frank managing director (residential services) Peter Ow welcomed the change, describing it as ‘taxing the rich to give the poor. It’s a fairer system’.

He does not expect the higher property tax rate payable for higher AV properties to dent demand for residential properties bought for owner occupation. ‘The 2 per cent will not hurt the pockets of owners in this bracket. A property with $65,000 AV would probably be worth around $2.5 million to $3 million.’

Leonard Ong, executive director, KPMG Tax Services, said: ‘We think it is a good way for Government to help owner occupiers of residential properties in Singapore. The bulk of them will be in the lower band of property tax; only a minority, those who own higher-value properties, will be in the upper tax band. This benefits more people than the current structure, which is a flat rate system.’

The property tax for non-owner-occupied residential properties as well as other properties will remain at a flat rate of 10 per cent of AV.

Inland Revenue Authority of Singapore determines the AV of a property by analysing rents of similar properties.

Currently, in addition to the 4 per cent concessionary tax rate, owner-occupied residential properties with AVs below $10,000 can enjoy the ongoing 1994 property tax rebates ranging from $25 to $150, depending on the AVs of the properties. The rebates, introduced together with the Goods and Services Tax, are aimed at supporting the lower- and middle-income groups. ‘It has significantly reduced property tax payable by HDB flat owners. However, as HDB homes gradually appreciate in value over the long term, flat owners will see an increasing property tax bill over time,’ Mr Tharman said.

The government provided special additional rebates last month to mitigate increases in tax payable as a result of higher rentals and hence AVs of HDB flats over the past two years.

However, the need for a longer-term solution that provides a fair and balanced system for all property owners led Mr Tharman to announce the progressive property tax schedule for owner-occupied residential property.

Market watchers also noted that there were no property tax rebates for commercial and industrial properties in the latest Budget statement.

Earlier in his Budget speech when he covered the fiscal position for FY2009, Mr Tharman also revealed that a strong recovery in the volume of transactions in the property market boosted stamp duty collections which ended up $1.3 billion higher than initially estimated.

Source: Business Times, 23 Feb 2010

CURRENTLY: Owner-occupied residential properties are taxed at a concessionary 4 per cent rate.

In addition, owner-occupied residential properties with an annual value (AV) of below $10,000 can enjoy the ongoing 1994 property tax rebates ranging from $25 to $150, depending on the AV of their properties.

The AV is the estimated annual rent of your property if it were to be rented out, excluding the rent for furniture, fittings and any service charge.

All other properties are taxed at 10 per cent.

BUDGET 2010:

For property tax payable from January next year, the 1994 property tax rebates will be replaced by a progressive property tax schedule for owner-occupied residential properties:

0 per cent for the first $6,000 of AV;
4 per cent for the next $59,000 of AV;
6 per cent for the balance of AV in excess of $65,000.
Non-owner-occupied residential properties and other properties will continue to be subject to 10 per cent property tax.

Source: Straits Times, 23 Feb 2010

SINGAPORE is shifting to a progressive property tax system that will mean lower- and middle-income property owners living in their homes will pay less tax.

All Housing Board (HDB) flat owners and a large majority of private property owners will enjoy tax savings of $240 a year as a result of the new system.

Finance Minister Tharman Shanmugaratnam said yesterday in his Budget statement that the Government intends to keep the property tax ‘as a means of redistribution in our society, together with our income tax regime’.

Although the current system already taxes the wealthy more than others, there is ’scope for us to introduce further progressivity in property taxes’, he said.

The new property tax regime is a three-tiered one at 0 per cent, 4 per cent and 6 per cent, and replaces the current flat 4 per cent concessionary rate for owner-occupied residential homes.

The first $6,000 of a home’s annual value (AV) will be exempted from property tax – saving owners $240.

The next $59,000 will be taxed at 4 per cent and any AV above $65,000 will be taxed at 6 per cent.

The AV is the estimated annual rent of an owner-occupied property if it were rented out, excluding rent for furniture, fittings and any service charge.

The new system will apply for property tax payable from January next year.

Currently, owner-occupied homes with AVs below $10,000 also enjoy the ongoing 1994 property tax rebates ranging from $25 to $150, depending on the AV of their properties.

This will cease and be replaced by the new system. All other non owner-occupied properties are taxed at 10 per cent and are unaffected by the new tax regime.

Mr Tharman explained yesterday that when the Government abolished estate duty entirely in 2008, property tax was the remaining form of tax on assets.

He said the Government intended to retain property tax as it did not affect the middle and upper-middle groups more than the wealthier ones.

This was the reason that estate duty, which had been impacting middle and upper-middle income earners to a disproportionate extent, had been scrapped.

Mr Tharman added that a moderately progressive property tax system, together with an income tax system that collects more tax from the wealthy and a flat goods and services tax rate that everyone pays, will, together form a fair system of taxes in Singapore.

‘Everyone pays something, but the rich pay more. Taken together, the overall burden of taxes will and must remain low by international standards,’ he said.

He also noted, however, that as HDB homes gradually appreciate in value over the long term, flat owners will see an increasing property tax bill over time.

KPMG executive director (tax services) Leonard Ong said yesterday that the new system is a ‘fairer way of collecting property taxes, as only a small, wealthier majority end up paying more’.

Indeed, owners of high-end properties will see a small increase in tax payable.

They comprise the top 3 per cent of private owner-occupied residential properties, or the top 0.4 per cent of all owner-occupied homes in Singapore, said Mr Tharman.

Homes with AVs of about $80,000 will face only a small increase in tax, of slightly less than $100 per year.

A property with an AV of $150,000, which typically is a large property in the central districts and is within the top 0.5 per cent level of private owner-occupied homes, will face an increase in property tax of about $1,500 per year.

However, the new tax rates, even for the high-end, will remain lower than in most international cities, he added.

‘That is as it should be, so that we remain a vibrant and attractive place for businesses and individuals alike.’

Real estate consultancy Colliers International managing director of China, Singapore and Taiwan, Mr Dennis Yeo, said the switch to a more moderate progressive tax schedule is a more long-term approach than the periodic tax rebates extended by the Government previously.

‘It is expected to have little bearing on the property market in terms of market sentiment and activities,’ he said.

This new progressive system of property taxes will cost the Government about $230 million a year initially, said Mr Tharman.

Source: Straits Times, 23 Feb 2010

The Government has introduced two new measures that will take effect Saturday to temper sentiments and pre-empt a property bubble from forming in the private residential market.

It said they will help to ensure a stable and sustainable property market.

The first is a Seller’s Stamp Duty on all residential properties and residential lands that are bought after Friday and sold within one year from the date of purchase. The stamp duty will be applied at the standard ad valorem stamp duty rates for the conveyance, assignment or transfer of property.

Housing and Development Board (HDB) flats will not be subjected to the stamp duty as they are already subject to a minimum occupation period of at least one year.

The Ministry of National Development (MND) said the objective of this new tax measure is to discourage short-term speculative activity that could distort underlying prices. It stressed that it is not targeted at the purchase of properties for owner occupation or longer term investment.

The housing loan limit will also be capped at 80 per cent of the private property’s value, instead of the current 90 per cent.

The 80 per cent Loan-To-Value limit will apply to all housing loans granted by financial institutions for private residential properties, Executive Condominiums, HUDC flats and HDB flats, including those under the Design, Build and Sell Scheme.

Loans granted by the HDB for flats – including those under the Design, Build and Sell Scheme – will still have a cap of 90 per cent.

MND said this is because HDB flats are already subject to other criteria to prevent speculation and encourage financial prudence, such as minimum owner occupation period and restriction on ownership to one flat per household.

Explaining the rationale for the measures, MND said there is a risk that the market could overheat in the next few months, given the optimism fuelled by the economic recovery and low global interest rates.

However, it noted that the current level of speculative activity is still lower than what it was at the height of the property market boom. Overall price levels are below the previous peak.

MND warned that any excessive exuberance will make the property market vulnerable to the continuing risks in the global economy.

The Government described the new measures as “calibrated”, saying it prefers to take small steps early, rather than be forced to impose more drastic measures after a bubble has formed.

It will continue to ensure that there is adequate supply of housing to meet demand. Sites that can yield 10,550 private housing units have already made available in the Confirmed and Reserve List of the Government Land Sales (GLS) Programme in the first half of 2010.

This is the highest supply quantum in the history of the GLS Programme.

Source: Channel News Asia,– 19 Feb 2010

THE just-announced seller’s stamp duty, which will be imposed on all residential lands and homes bought before Saturday and sold within a year, will not apply to Housing Board flats, said the Government on Friday.

This is because HDB flats are already subject to a minimum one-year occupation ruling.

The Government said the new tax measure is to ‘discourage short-term speculative activity that could distort underlying prices’, and it is not targeted at the purchase of properties for owner-occupation or longer term investment.

Loans granted by the HDB for its flats, including the Design, Build and Sell Scheme (DBSS), will still continue to be capped at 90 per cent because they are subject to other criteria to prevent speculation and encourage financial prudence, said the Government.

HDB loans are offered to only eligible first-time flat buyers or second-timers who are upgrading. And they are required to use all of their CPF Ordinary Account balance before HDB would give them the loans, which is in line with HDB’s home ownership policy of helping eligible buyers, especially first-time buyers, to purchase public housing in a financially prudent manner.

But for all other housing loans provided by financial institutions regulated by the Monetary Authority of Singapore, they will be capped at 80 per cent of the property purchase price, instead of the current 90 per cent, from Saturday.

Source: Straits Times, 19 Feb 2010

IT IS not equitable to place any property tax burden on HDB flat owners who do not receive any rental income.

Property tax as a form of indirect taxation should be levied only if there is any realised gain on the sale of the HDB flat, or if it generates income via rent.

Also, the increase in property tax due to the increase in the market value of flats is nothing but lame. Most of us HDB flat owners do not gain any benefit from such increase in market value as it is considered ‘unrealised’ gain.

Taxation should be levied only on actual realised gain, whether it is capital or revenue in nature.

Martyn Lee

Source: Straits Times, 8 Dec 2009