Ravi Chandran
From 2023, investment home owners must pay higher taxes. Singapore property tax for non-owner-occupied properties, including tenanted or investment properties, will be raised across the board from 10 to 20 per cent to 11 to 27 per cent. Taxes will be hiked further to 12 to 36 per cent in 2024. But despite this, many investors and landlords in Singapore will find owning an investment property for passive rental income attractive.
From a tax perspective, the first thing you need to do before renting residential property is to ensure that your tenancy agreement is e-Stamped, and you should also make sure to pay income tax on the rental income you receive.
Before renting residential property, investment home owners should notify IRAS on the Start of Lease
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All lease documents are required to be e-Stamped. IRAS will be notified of the rental and you need NOT inform IRAS separately.
You would also have to ensure that your tenant e-Stamps the rental agreement (including rental agreements for rental of rooms). You may request for a copy of the stamp certificate from your tenant to ensure that the rental agreement has been stamped. The penalty for non-compliance of the above obligation is a fine of up to $5,000 and an interest on the tax at such rate as may be prescribed (if any).
If you are renting residential property in its entirety, any owner-occupiers tax rates applied on your property will be withdrawn from the date of letting. You will need to pay higher property tax based on residential tax rates.
The policy intent of owner-occupier tax rates is to encourage home ownership in Singapore. They are only applicable if owners are residing in their residential property and does not apply to investment home owners.
The owner-occupier tax rates are progressive tax rates based on the annual value of your property. This means residential properties of higher annual value are taxed at higher rates while most owner-occupied properties (including all HDB flats) will continue to enjoy lower tax rates.
Owner-Occupier Tax Rates
| Annual Value ($) | Effective 1 Jan 2015 | Property Tax Payable |
|---|---|---|
| First $8,000 Next $47,000 | 0% 4% | $0 $1,880 |
| First $55,000 Next $15,000 | – 6% | $1,880 $ 900 |
| First $70,000 Next $15,000 | – 8% | $2,780 $1,200 |
| First $85,000 Next $15,000 | – 10% | $3,980 $1,500 |
| First $100,000 Next $15,000 | – 12% | $5,480 $1,800 |
| First $115,000 Next $15,000 | – 14% | $7,280 $2,100 |
| First $130,000 Above $130,000 | – 16% | $9,380 |
| Annual Value ($) | Effective 1 Jan 2023 | Property Tax Payable |
|---|---|---|
| First $8,000 Next $22,000 | 0% 4% | $0 $880 |
| First $30,000 Next $10,000 | – 5% | $880 $500 |
| First $40,000 Next $15,000 | – 7% | $1,380 $1,050 |
| First $55,000 Next $15,000 | – 10% | $2,430 $1,500 |
| First $70,000 Next $15,000 | – 14% | $3,930 $2,100 |
| First $85,000 Next $15,000 | – 18% | $6,030 $2,700 |
| First $100,000 Above $100,000 | – 23% | $8,730 |
| Annual Value ($) | Effective 1 Jan 2024 | Property Tax Payable |
|---|---|---|
| First $8,000 Next $22,000 | 0% 4% | $0 $880 |
| First $30,000 Next $10,000 | – 6% | $880 $600 |
| First $40,000 Next $15,000 | – 10% | $1,480 $1,500 |
| First $55,000 Next $15,000 | – 14% | $2,980 $2,100 |
| First $70,000 Next $15,000 | – 20% | $5,080 $3,000 |
| First $85,000 Next $15,000 | – 26% | $8,080 $3,900 |
| First $100,000 Above $100,000 | – 32% | $11,980 |
The owner-occupier tax rates are not applicable to investment home owners and to any home buyers in any of the following scenarios:
- You have wholly rented out your property;
- You have sold the property;
- The residential property is owned by a company, trust, association or a body of persons; and
- The property is a commercial or industrial building or land.
- The property is vacant.
Scenarios
Scenario 1: Owning more than 1 home
If you own a private property or HDB flat (A) and recently purchased another private property (B), you can apply for the owner-occupier tax rates for property (B) if you are living in it. The concession on property (A) will cease from the date you start enjoying the owner-occupier tax rates on property (B).
Scenario 2: Owning a property with a non-spouse
If you jointly own 2 residential properties (A and B) with another party other than your spouse (e.g. parents, siblings, etc.), you can apply for concession for each of the property.
Example: If you occupy residential property (A) and your parents occupy residential property (B), you can apply for the owner-occupier tax rates for property (A) and your parents can apply for the concession for property (B).
Scenario 3: Renting part of your home
If you partially let out your home while still living in it, you are still eligible for the owner-occupier tax rates.
Scenario 4: Deceased owner
The owner-occupier tax rates apply only when the owner owns and lives in the residential property.
When the owner passes away, the Legal personal representative should complete the legal transfer of the property to the beneficiaries as soon as possible. Owner-occupier tax rates may then apply, depending on the new ownership structure.
When the owner of a residential property that qualifies for owner-occupier tax rates passes away, IRAS will continue to apply the concession for up to 2 years from the owner’s passing or the date of transfer of the property, whichever is earlier. The tax rates will only be adjusted to higher non-owner-occupier tax rates if the property remains to be held by the estate of the deceased person. This automatic extension of the concessionary tax rates is to allow some time for the property transfer arrangements to be made. Once the property transfer arrangements are completed, if the new owner moves in to reside in the property, he/she can then apply for the owner-occupier tax rates from the date of occupation.
If the property is legally constrained from being transferred to the beneficiaries (e.g. the beneficiary is below the legal age of 21), you can submit an appeal via email for the owner-occupier tax rates to continue to apply to the property. Beneficiaries have to be residing in the property and not be enjoying owner-occupier tax rates on another property to qualify for the concession.
Automatic application of owner-occupier tax rates not applicable to investment home owners
Owner-occupier tax rates will automatically apply to:
- Buyers of new/ resale HDB, DBSS flats and new executive condominiums.
- Buyers of private residential property
If you are a Singapore Citizen or Singapore Permanent Resident who has purchased a new or resale private residential property, the owner-occupier tax rates are automatically applied when you and your spouse are not currently enjoying owner-occupier tax rates on any other residential property.
The rent investment home owners receive from renting residential property in Singapore may be subject to income tax. Income Tax is a tax payable on all income earned or received in Singapore, including any payout or profit arising from investments unless the investments are specifically exempted under the Income Tax Act. There is no double taxation since Property Tax and Income Tax are two separate taxes.
