Singapore Private Residential Property – Foreign Ownership Guidelines
1) Background
2) Restrictions under the Act
3) Approval
4) Exceptions: “non-restricted residential property” under the Act
Singapore Private Residential Property – Taxation Guidelines
1) What is Stamp Duty?
2) What are the Property Tax Rates?
3) Am I liable to pay Capital Gain Tax?
4) Income Tax on Rental
Singapore Private Residential Property – Financing & Other Expenses Guidelines
1) What is the maximum financing (loan) amount a foreigner can obtain?
2) What are the different types of bank loan available?
3) Any other expenses involved in investing in Singapore properties?
————————————————————————————————————————————————-
Singapore Private Residential Property – Foreign Ownership Guidelines
1) Background:
Since 1973, the Singapore Government has imposed certain restrictions on foreign persons owning residential land in Singapore. Such restrictions are governed by the Residential Property Act (Cap. 274) of Singapore (“the Act”).
Under the Act, a foreign person means any person who is not any of the following:
· Singapore citizen;
· Singapore company;
· Singapore limited liability partnership;
· and Singapore society.
2) Restrictions under the Act
The restriction on foreign acquisition is confined to residential land. Accordingly, a foreign person (including natural persons, companies and societies) is restricted from purchasing certain residential property within the meaning of the Act. Such property includes:
· vacant residential land;
· landed residential property [i.e detached house, semi-detached house, terrace house (including linked house or townhouse); and
· landed property in strata developments which are not approved condominium developments under the Planning Act.
A foreign person who intends to purchase any of the above residential property has to obtain the prior approval of the Minister for Law.
3) Approval
If a foreign person is interested in purchasing a “restricted” residential property, requisite approval must be sought from the Minister of Law to become an approved purchaser. A duly completed application form must be submitted together with all relevant supporting documents (such as entry and re-entry permits and qualifications) to:
Land Dealings (Approval) Unit
Singapore Land Authority
8 Shenton Way
#27-02
Singapore 068811
The Land Dealings (Approval) Unit administers the provisions of the Act and its rules by:
· processing applications from foreign persons and foreign companies for approval to acquire or retain restricted residential property;
· issuing clearance certificates to Singapore companies and societies;
· prosecuting offences under the Act; and
· dealing with general enquiries relating to the operation of the Act.
4) Exceptions: “non-restricted residential property” under the Act
Generally, a foreign person is not restricted from acquiring:
· any apartment within a building;
· any flat or dwelling house in an approved condominium development under the Planning Act. However, a foreign person is not allowed to buy all the apartments within a building or all the units in the condominium development without the prior approval of the Minister for Law.
Singapore Private Residential Property – Taxation Guidelines
1) What is Stamp Duty?
Stamp duty is the tax payable on the purchase of immoveable properties and is computed as follows:-
(Purchase price x 3%) less S$5,400
For example, for a S$1,000,000 property, the stamp duty is:-
= S$1,000,000 x 3% – S$5,400
= S$30,000 – S$5,400
= S$24,600
Once the relevant document is executed, it must be stamped within 14 days from the date of the document.
2) What are the Property Tax Rates?
· owner-occupied properties – 4% of the annual value (AV)
· investment and other properties – 10% of the AV
The AV is determined by the Valuation Review Board of Inland Revenue (“IRAS”) based on the average annual rent of similar properties. The property tax is payable within 1 month the date of Notice and this is usually served on 31st January of each year.
3) Am I liable to pay Capital Gain Tax?
Currently, there is no capital gain tax in Singapore.
4) Income Tax on Rental
4a) Do I have to declare the rent income received from my property for Income Tax purposes?
Yes, when filing the income tax return, the total rent and deductible expenses claimed for each property must be reported.
4b) For income tax purposes, what are the various deductible expenses from the rental income?
The following are deductible for income tax purposes.
· interest on your mortgage loan
· property tax
· fire insurance on your property
· repairs and maintenance which can include painting, pest control, and monthly maintenance charges to management corporations
· commission paid on getting a subsequent tenant
· cost of renewing a lease or getting a new tenant (except for the first tenant)
The following are NOT deductible for income tax purposes.
· mortgage or bank loan repayments
· agent’s commission, advertising costs and legal costs, for getting the first tenant
· depreciation of furniture and fixtures
· costs of renovation, additions, and alterations to the property, for example extension of car porch, construction of drains, cementing of walls and floors, and installation of window grilles
4c) Any supporting receipts/documents required to be submitted to the IRAS to support the claim for deductible expenses?
No, supporting documents are not required to be submitted together with the income tax form. However, it is necessary to retain these documents in case they are requested for verification purposes.
4d) What happens if I make a rental loss?
Even if you have made a net loss in rent, you have to report the details of the loss arising from the property in the income tax form.
4e) Is the net rental loss from the previous year deductible against current year’s net rental income?
No, you cannot offset the previous year’s rental loss against current year’s rental or any other sources of income.
4f) Currently I own 2 properties. Is the loss in rent from property A deductible against the rent from property B?
Yes, as a concession the IRAS allows the loss in rent from one property to be deducted against the gains in rent from property
4g) I own a property and we received a gross rent of S$8,000 for the period Jun-Dec 2005 and S$33,000 for the period Jan-Dec 2006. The expenses were S$9,500 and S$20,000 resulting in a net rental loss of S$1,500 and income of S$13,000 respectively.
i. In the income tax return for the Year of Assessment 2007, can I include the rental loss received from Jun ’05 – Dec ’05?
No, the rental loss from the previous year cannot be set-off against current year’s income. In addition, the net rental income will have to be jointly apportioned according to your share in the property.
ii. If the property is purchased jointly with another person, does the co-owner(s) needs to report the rent?
Yes, the co-owner must also report his share of the rental income in his income tax form. If each of the owners hold 50% share of the property, the net loss for the year ended 31/12/2005 will be S$750 each.
4h) Rental due in Dec 06 was only received in Jan ’07, do I need include this amount in the income tax return for year of assessment 2007?
Yes. The rent due in 2006 has to be included in the income tax return for year of assessment 2007 even if the rent was received at a later date.
4i) What is the tax rate for rent income for non-resident individuals?
For the Year of Assessment 2007, the net rental income for non-resident individuals will be taxed at 20%.
Singapore Private Residential Property – Financing & Other Expenses Guidelines
1) What is the maximum financing (loan) amount a foreigner can obtain?
The bank can loan a foreigner up to a maximum of 80% of the purchase price of the property subject to property valuation by the lenders.
2) What are the different types of bank loan available?
The loan can be pegged to either fixed rates or floating rates.
3) Any other expenses involved in investing in Singapore properties?
· Legal fee – a one-time legal fee of about $2,000 SGD per transaction. However, the bank may usually provide full legal subsidy if you take up a loan subject to the bank’s terms and conditions.
· Renovation costs.
· Furnishing costs – in the case of renting out the property, additional costs have to be catered for fixing lightings and curtains and purchasing of furniture and electrical appliances etc.
