Ravi Chandran
Property Tax is a tax on property ownership and applies whether the property is rented out, owner-occupied or vacant
The privilege of owning property comes with the need to pay tax on that property annually. Property Tax is a tax on property ownership and applies whether the property is rented out, owner-occupied or vacant. Even as we enjoy the perks of the property or properties we own, it is imperative that we remember to fulfil our tax obligations to the Inland Revenue Authority of Singapore (IRAS).
In Singapore, we have a progressive property taxation system. Broadly speaking, there are two different tax rates that will apply on the residential property depending on whether the residential property is owner-occupied (i.e. you own the residential property and you live in it) or whether the residential property is non-owner occupied (i.e. you own the residential property but you do not live in it).
All other properties are taxed at 10% of the Annual Value.
WHEN IS PROPERTY TAX DUE
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Your next Property Tax bill is due on 31 Jan 2021.
IRAS will send out customised SMS reminders to those who have not paid and will also send out final reminders in the last week of January 2021. The SMS reminders will set out your property address, tax amount payable plus your unique property tax reference number. While we are lucky in Singapore with IRAS taking a proactive step in reminding us to pay our tax dues, we should still keep on top of such payments without relying on such reminders. It is imperative to note that if your property tax payment is not received before the due date, a 5% late payment penalty will be imposed on the unpaid tax.
However, you do have the right to appeal or ask for a waiver of the late fee penalties which may be considered when you pay your overdue tax in full, or if you have been good at paying for the past two years. Note that this is at the sole discretion of IRAS.
If you persist in not paying, the billing institution may request for the amount to be deducted from your bank account directly via GIRO
HOW TO PAY
IRAS makes it really convenient to pay your property tax and there are many options to choose from. You can pay via AXS, Internet Banking, SAM or via NETs at any post office. All you need is your property tax reference number. You can also pay by GIRO which will let you pay monthly in interest -free monthly instalments if you so choose.
HOW PROPERTY TAX IS CALCULATED
In a nutshell, the property tax payable = Annual Value of the property in question multiplied by the applicable tax rate. For case studies to illustrate this formula, you should read more about Property Taxes in Singapore.
What is Annual Value?
In short, the Annual Value of a given property is the estimated gross annual rent payable on the property if it were to be rented out, minus the cost of furniture, furnishings and maintenance fees. The amount is based on the estimated market rental amounts of similar or comparable properties and not on the actual rental income received. The way the Annual Value is determined is the same for all properties whether its owner or non-owner occupied.
More information on Annual Value can be found on the IRAS webpage on the subject matter.
What is the applicable tax rate?
| Owner-occupier Residential Tax Rates | ||
| Annual Value ($) | Effective 1 Jan 2015 | Property Tax Payable |
| First $8,000 | 0% | $0 |
| Next $47,000 | 4% | $1,880 |
| First $55,000 | – | $1,880 |
| Next $15,000 | 6% | $ 900 |
| First $70,000 | – | $2,780 |
| Next $15,000 | 8% | $1,200 |
| First $85,000 | – | $3,980 |
| Next $15,000 | 10% | $1,500 |
| First $100,000 | – | $5,480 |
| Next $15,000 | 12% | $1,800 |
| First $115,000 | – | $7,280 |
| Next $15,000 | 14% | $2,100 |
| First $130,000 | – | $9,380 |
| Above $130,000 | 16% |
| Non-owner-occupier Residential Tax Rates | ||
| Annual Value ($) | Effective 1 Jan 2015 | Property Tax Payable |
| First $30,000 | 10% | $3000 |
| Next $15,000 | 12% | $1,800 |
| First $45,000 | – | $4,800 |
| Next $15,000 | 14% | $ 2100 |
| First $60,000 | – | $6,900 |
| Next $15,000 | 16% | $2,400 |
| First $75,000 | – | $9,300 |
| Next $15,000 | 18% | $2,700 |
| First $90,000 | – | $12,000 |
| Above $90,000 | 20% |
Source: IRAS
WHAT HAPPENS IF YOU DISAGREE WITH THE IRAS’S ASSESSMENT OF THE ANNUAL VALUE OF YOUR PROPERTY?
IRAS determines the Annual Value of your property.
IRAS reviews the Annual Value of properties yearly to reflect the changes in the market rental values of comparable properties. The Annual Value will be amended if the latest market rent data no longer support your existing Annual Value. If your property undergoes physical changes that could materially affect its rental value, IRAS will also revise such Annual Value at the date of the change.
You can check the Annual Value of your property using IRAS’s e-Service “View Property Dashboard”. All Annual Values shown are as at the current date.
You can object to the Annual Value and/or its effective date within 30 days from the date of the Valuation Notice. If you do not receive the Valuation Notice, you can also object to the AV at any time in the year if you can show that the market values have dropped to below the AV. You cannot, however, object to the tax rates.
If your objection is declined, you can appeal to the Valuation Review Board (VRB) within 30 days of the notice on the outcome of your objection. You need to pay the following fees to VRB:
- $50 for a residential property taxed at owner-occupier tax rates; or
- $200 for any other property.
In your appeal, you need to state the grounds of your appeal and indicate whether you are represented by any agent.
EXEMPTIONS
In Singapore, there are a few types of properties that are eligible for a tax exemption. These include (but are not limited to) properties which constitute places of worship, are used for charitable purposes, are utilised for education or schooling purposes or those which promote social development in the country.
Property tax is a tax on ownership of property, irrespective of whether the property is occupied or vacant. It is different from Income Tax, which applies to the rental income earned from renting out the property. To encourage home ownership, owner-occupied HDB flats are taxed at substantially lower owner-occupier tax rates.
Necessary property tax info requires IRAS to bill the owners in the months of Nov and Dec for property tax in the ensuing year. HDB flat owners have to ensure that the yearly property tax is paid by 31 Jan.
If you buy a new flat direct from HDB, within a year of taking possession of your flat, the Inland Revenue Authority of Singapore (IRAS) will send you a Valuation Notice notifying you of the proposed Annual Value (AV) of your flat, and your first Property Tax Bill showing you the amount of property tax payable from the date of possession. You are to pay your tax within 30 days of the Bill.
If you buy a new Design, Build & Sell Scheme (DBSS) flat from the Developer, within a year of the Temporary Occupation Permit (TOP) date, IRAS will send you a Valuation Notice to notify you of the proposed Annual Value (AV) of your flat, and your first Property Tax Bill showing the amount of property tax payable from the date of issuance of TOP. You are to pay your tax within 30 days of the Bill.
The apportionment of property tax liabilities during property transfer is a private arrangement between the developer/vendor and the purchaser. You may wish to approach the developer based on the terms of your contract.
Necessary property tax info for Amount of Property Tax Payable
The property tax is calculated by multiplying the Annual Value (AV) of the property with the prevailing property tax rate. If you live in your flat, your flat will be taxed at the substantially lower owner-occupier tax rates .
For owner-occupied HDB flats, you need not pay tax on the first $8,000 of the AV from 2014. The remaining AV will be taxed at the lowest tier of 4%. Non-owner-occupied HDB flats are taxed at 10% of their AVs as their AVs do not exceed $30,000.
Example: 4-Room HDB flat with AV of $10,140 (1 Jan – 31 Dec 2018)
| OWNER-OCCUPIED | NON-OWNER OCCUPIED | ||
|---|---|---|---|
| AV AND TAX RATES | TAX PAYABLE | AV AND TAX RATES | TAX PAYABLE |
| First $8,000 @0% | $0 | First $10,140@10% | $1,014.00 |
| Next $2,140 @4% | $85.60 | ||
| Tax Payable | $85.60 | Tax Payable | $1,014.00 |
As for the Annual Value of the flat, IRAS assesses HDB flats by analysing the recent rental rates of the various room types. The data for rental rates is available from the e-stamping records. Generally, bigger room types command higher rental rates than the smaller room types within the same location. HDB flats in central locations also command higher rental rates compared to flats located in outlying locations. The AVs would have reflected the differences in the property location as well as the room types.
Temporary Extension of Stay
HDB has a policy to allow sellers to extend their stay for a default period of 3 months after the sale of the flat to the new owner. If you have agreed to this arrangement with the seller, you would have been informed by HDB that you must pay property tax at Residential Tax Rate (10% of your AV) for the 3 months. Owner-occupier tax rates will not be applied on your flat for the extension period because you are not staying in the flat. This is stated in the HDB Terms and Condition and the Letter of Acceptance and Indemnity when you applied for the temporary extension of stay.
After the 3 months extension of stay is over, owner-occupier rates will automatically apply. Owners need not write in to IRAS to request owner-occupier rates.
You will be responsible for the payment of property tax as the new owner of the flat from the date of transfer. Property Tax will be based on 10% of the Annual Value of the flat during the 3 months extension stay period and at owner-occupier tax rates thereafter. You need not apply for the owner-occupier tax rates.
For all applications for extension of stay, HDB will give the maximum period of 3 months from the date of completion of the resale. Should the seller terminate their extension of stay early, you are required to update HDB by logging in to My HDBPage with your Singpass within 7 days of the termination. Once you have updated or notified the HDB branch, HDB will transmit the information to IRAS. No further action is required from you and IRAS will notify you of the tax adjustments in the following month.
If you planning to buy an HDB flat but unsure if you should go for a HDB loan or bank loan, you should approach mortgage broker as they can set you up on a path that can get you a home loan in a quick and seamless manner. Most mortgage brokers have close links with the best lenders in town and can help you compare Singapore home loans and settle for a package that best suits your home purchase needs. You should also find out about money saving tips.
