1. What is Property tax?
Property tax is a wealth tax levied on property ownership. It is not a tax on rental income. It is thus levied on the ownership of properties, irrespective of whether the property is occupied or vacant.
2.How is property tax calculated?
The property tax is calculated by multiplying the Annual Value (AV) of the property with the prevailing property tax rate.
Annual Value (AV)
Every property has an AV. This AV of a property is determined based on market rentals of similar or comparable properties. What this means is that if you own a five-room flat in Toa Payoh, the Inland Revenue Authority of Singapore (IRAS) looks at similar five-room flats in Toa Payoh and how much they are rented out at, to determine the Annual Value.
Property Tax rates
We have progressive property tax rates for residential properties- the higher the value of the residential property, the higher the tax rate.
Changes were introduced to both owner-occupied homes, and non-owner occupied residential properties.
Owner-Occupied Residential Properties
Under the new property tax structure, properties with AV below $8,000 will pay no property tax. In fact, all homes with AVs up to $59,000 will either pay no property tax or lower effective property tax, as compared to the property tax payable under the previous structure. The new rates took effect on 1 January 2014 and 1 January 2015.
Non-Owner-Occupied Residential Properties
(This refers to residential buildings which are not owner-occupied and does not include residential land.)
Property tax rates for non-owner-occupied residential properties will be based on a progressive scale ranging from 10% to 20%, up from a flat 10% previously. The new structure took effect from 1 January 2014.
The tax rates for owner-occupied residential rates will continue to be lower than those for non-owner-occupied residential properties. The tax rates are shown in the tables below:
A) Progressive tax rates for non-owner occupied properties | |||
|---|---|---|---|
| Progressive Tax Rates | ||
Annual value ($) | Effective 1 Jan 2014 | Effective 1 Jan 2015 | |
First 30,000 | 10% | 10% | |
Next 15,000 | 11% | 12% | |
Next 15,000 | 13% | 14% | |
Next 15,000 | 15% | 16% | |
Next 15,000 | 17% | 18% | |
AV in excess of $90,000 | 19% | 20% | |
B) Progressive tax rates for owner occupied properties | |||
| Progressive Tax Rates | ||
Annual value ($) | Effective 1 Jan 2014 | Effective 1 Jan 2015 | |
First 8,000 | 0% | 0% | |
Next 47,000 | 4% | 4% | |
Next 5,000 | 5% | 6% | |
Next 10,000 | 6% | 6% | |
Next 15,000 | 7% | 8% | |
Next 15,000 | 9% | 10% | |
Next 15,000 | 11% | 12% | |
Next 15,000 | 13% | 14% | |
AV in excess of $130,000 | 15% | 16% | |
3. Why does my Annual Value change over the years?
As property tax is a wealth tax based on property ownership, AV is reviewed and adjusted to reflect the change in market values of comparable property. The AV may be revised upwards, downwards or kept at the same level depending on the market values.
4. Why do I have to pay property tax on my home when I am an owner-occupier and not deriving rental income?
Property tax is based on property ownership and therefore is levied regardless of whether the property is owner-occupied, vacant or rented out. However, to encourage home ownership, we have a lower tax rate for owner-occupied residential properties.
For more information on the concessionary owner-occupier's tax rate, please refer to IRAS' website.
5. I rent out my residential property and have to pay tax on my rental income and on the property. Am I being taxed twice?
There is no double taxation here. Property tax is imposed based on property ownership. It is different from income tax on the rental income, which is a tax on the income which an individual earns.
For more information on property tax, please refer to IRAS' website.
6. Why not use Capital Value to estimate Annual Value for property tax calculation?
In Singapore, we use rental transactions of comparable properties to determine the AV of the property for the purpose of property tax, for two reasons.
First, there are generally more rental transactions than sales transactions, to allow AV to be determined for each property based on comparable properties. Second, movements in sale prices are more volatile than rentals. Hence, using rental transactions to derive the AV helps to keep property tax more stable for property owners.
This practice of using market rents to determine the AV is also adopted by other jurisdictions like Hong Kong and Malaysia.
7. How else do we tax wealth?
We tax wealth through the property tax, stamp duty, and additional registration fee for motor vehicles. The higher value the residential property or motor vehicle, the higher the tax.
We will continue to study how we can strengthen our current system of wealth taxes. However, many forms of wealth are mobile, and as long as there are differences in wealth taxes across jurisdictions, such wealth can and will move. Any tax must therefore be effective and cannot be avoided easily, to be a good long-term solution.
