Overview of property taxes for foreigners in Singapore
Foreigners are required to pay
1) tax on rental income, and
2) property tax in Singapore.
- Singapore imposes an income tax on investment homes, i.e., income tax on the rental income. This means that any profit or the net amount left once you have added together your rental income and deducted any allowable expenses is taxable. A rental income is taxable when it is due and payable to the property owner and not upon the date of actual receipt. Rental income earned from the letting of property in Singapore is subject to income tax, while the property itself is subject to property tax. A tax resident in Singapore pays resident tax rates on his or her rental income. Rental income refers to the full amount of rent and related payments you receive when you rent out your property. This includes rent of the premises, maintenance, furniture, and fittings.
- Property Tax in Singapore is a kind of wealth tax imposed in Singapore on property ownership irrespective of whether the property is occupied or vacant. And the tax rates are progressive, different for owner-occupied and non-owner-occupied homes, to encourage home-ownership in the country.
1) Tax on rental income for foreigners in Singapore
Foreigners that own property in Singapore may earn income by renting out their property. Any rent payments you receive when you rent out your property – includes rent of the premises, maintenance, furniture, and fittings – are subject to income tax and must be declared in your income tax return. This means that any profit or the net amount left once you have added together your rental income and deducted any allowable expenses is taxable.
Important tax considerations when renting out your property in Singapore
- Reporting rental Income: You have to declare the gross rent of your property in the previous year and details of deductible expenses of each property under “Other Income: Rent from property” in your tax return. The required details include – total annual rent collected; and total deductible expenses; the share of the rent (for the jointly-owned property)
- Sub-letting: Also, if you are sub-letting your property, your rental income from subletting is also taxable. Property owners are required to apportion the allowable expenses incurred based on the number of rooms rented out.
- Applicable date: Importantly, your rental income is taxable from the date it is due and payable to the property owner, and not the date of actual receipt.
- Rental deposit: Also, note that forfeiture of the rental deposit is generally considered as part of your gross rent and is taxable. However, depending on the reason for the forfeiture of the rental deposit (e.g. rental deposit forfeited due to damages to property by tenant), IRAS may consider excluding it as part of the gross rent.
- Tax based on ownership of property: The rental income is taxed 100% on the sole owner of the property. In case of joint ownership properties, the rental income is taxed on all the joint owners based on their legal share in the property. It does not matter which party receives the rent or whether the owners paid for the property.
- Offsetting rental losses: Losses from renting out your property cannot be carried forward and used to offset against any other income (e.g. employment income) that you may have in the same year or in the future. However, as an administrative concession, you may use the rental loss of one property to offset against the taxable rental income of another property in the same year provided all the rented out properties have been rented out at market rates.
Rental Tax rates for foreigners in Singapore
Please note that net rental income earned by foreigners who are tax residents of Singapore are taxed at resident rates – progressive in nature with the current highest rate at 22%; whereas net rental income earned by foreigners who are non-residents are taxed at the prevailing non-resident rate of 22% (20% prior to Year of Assessment (YA) 2017).
Tax deduction on Rental Expenses
Expenses incurred solely for producing the rental income and during the period of the tenancy may be claimed as a tax deduction. These include interest paid on the housing loan, property tax incurred during the rental period, premiums paid on fire insurance, repairs done during the rental period, cost of maintenance, replacement of furnishings, and utility expenses, among others.
- For residential properties: Property owners who lease their residential properties are able to enjoy the convenience of pre-filled rental expenses from YA 2016. To simplify tax-filing and reduce the burden of record-keeping, an amount of deemed rental expenses calculated based on 15% of the gross rent will be pre-filled on the online tax form. In addition to the 15% deemed rental expenses, property owners can still claim mortgage interest on the loan taken to purchase the tenanted property. You need to keep the supporting documents relating to the mortgage interest for at least 5 years for verification purposes, but you are not required to keep records of the other rental expenses incurred.
Alternatively, taxpayers can opt to claim the amount of actual rental expenses incurred. Please retain all supporting documents such as tenancy agreements, bank mortgage statements, invoices, and receipts for at least 5 years for verification purposes.
- For non-residential properties: You can only claim the actual rental expenses incurred. You are required to keep the supporting documents for at least 5 years for verification purposes.
Reporting Late or Not Reporting Rental Income
IRAS imposes penalties for submission of incorrect returns (e.g. failing to report any rental income) to IRAS. However, the Authority may waive the penalty if the voluntary disclosure is made within the ‘grace period’ of one year from the statutory filing date.
Related Article: Property Tax Singapore
2) Property Tax for foreigners in Singapore
Every property in Singapore is subject to property tax, which is calculated by multiplying the Annual Value (AV) of the property to the applicable Property Tax Rate. For example, if the AV of your property is $50,000 and your tax rate is 10%, you would pay $50,000 x 10% = $5,000.
Important tax considerations when paying property tax in Singapore
- Property tax is payable by whoever that has a legal or beneficial interest in the property. Usually, this name is included in the valuation list as the “owner”.
- For properties owned by more than one owner, all owners are collectively responsible for paying property tax. In the event of outstanding tax, enforcement action can be taken against any owner of the property to recover the tax.
- Property tax rates on owner-occupied and non-owner occupied residential properties are applied on a progressive scale. All other properties continue to be taxed at 10% of the Annual Value.
- Owner-Occupier Tax Rates (Residential Properties): Where the owner lives in (“occupies”) the property, the tax rates in Singapore are
Owner-Occupier Tax Rates Annual Value ($) Effective 1 Jan 2015 Property Tax Payable First $8,000
- Residential Tax Rates (Non-Owner Occupied Residential Properties): Where the owner does not live in (“occupy”) the property, the tax rates in Singapore are
Residential Tax Rates Annual Value ($) Effective 1 Jan 2015 Property Tax Payable
- Commercial and Industrial Properties(Non-Residential): Non-residential properties such as commercial and industrial buildings and land are taxed at 10% of the Annual Value. The owner-occupier tax rates do not apply to non-residential properties even if you have bought the properties for your own use/occupation.
Please do note that upon sale or transfer of a property, the buyer may need to reimburse a portion of the property tax already fully paid for the year by the seller back to the seller. Once the sale or transfer is complete, all property tax related correspondence including property tax bills will be sent to the new owner. As the new property owner, you will be liable for all property tax on the property.
What happens to Gains from Sale of Property in Singapore
No Capital Gains Tax in Singapore
Generally, the gains derived from the sale of a property in Singapore is not taxable as it is considered a capital gain and the country has no capital gains tax. The exception to the rule is when a person is deemed to be trading in properties. This is determined based on the following:
- the frequency of transactions (buying and selling of properties)
- reasons for acquiring and selling of property
- financial means to hold the property for long-term
- holding period
You must declare taxable gains from the sale of property under “Other Income” in your tax form. If you are unsure whether your gains from the sale of property, shares or financial instruments are taxable, Singapore Tax Accounting Services can help you.
In fact, we are best placed to help you with all your property taxes, as well as other taxation matters, since no one understands Singapore’s taxation regime better than us. When you engage our services, a Singapore taxation expert from our team, who will be your dedicated account manager – providing both continuity and familiarity – will assess, advise, prepare, review and file your returns.
Know about property taxes for foreigners in Singapore
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