1. What is property tax?
A property tax is a wealth tax on property ownership. It is not a tax on rental income. Rather, it is a tax on the ownership of property, regardless of whether the property is occupied or vacant.
2. How is property tax calculated?
The property tax is calculated by multiplying the annual value of the property by the current property tax rate.
Annual Value
Each property has an annual value. The value of the property is determined based on the market rent of similar or comparable properties. This means that if you own a five-bedroom apartment in Toa Payoh, the Inland Revenue Authority of Singapore will look at similar five-bedroom apartments in Toa Payoh and their rental prices to determine the annual value.
Property Tax Rates
Progressive tax rates are applied to residential properties, which means the higher the value of the residence, the higher the tax rate.
Owner-occupied residential properties
Under the new property tax structure, properties with an annual value of less than $8,000 will not be subject to property taxes. In fact, all homes with an annual value of less than $59,000 will not pay property taxes or will pay a lower effective property tax compared to the property taxes payable under the previous structure. The new tax rates will take effect on January 1, 2014 and January 1, 2015.
Non-Owner-Occupied Residential Property
This refers to residential property that is not owner-occupied and does not include residential land.
Property tax rates for non-owner-occupied residential properties will be based on progressive rates ranging from 10% to 20%, compared to the previous flat rate of 10%. The new structure will take effect on January 1, 2014.
3. Why does my annual value change from year to year?
Since property tax is a wealth tax based on property ownership, the AV will be reviewed and adjusted to reflect changes in the market value of comparable property. Depending on the change in market value, property taxes may be adjusted up or down or remain the same.
4. I own my home and have no rental income. Why do I have to pay property tax on my house?
Property tax is based on property ownership, so it is levied regardless of whether the property is owner-occupied, vacant, or rented. However, to encourage home ownership, we have implemented a lower tax rate for owner-occupied residential properties.
5. I rent out my residential property and I have to pay tax on my rental income and property. Am I being double taxed?
There is no double taxation here. Property tax is levied on the ownership of the property. It is different from income tax on rental income, which is a tax on income received by an individual.
6. Why don't we use the estimated annual value of capital value to calculate property tax?
In Singapore, we use rental transactions of comparable properties to determine the AV of the property for property tax purposes for two reasons.
First, there are generally more lease transactions than sales transactions so that the AV of each property can be determined based on comparable properties. second, changes in sales prices are more volatile than changes in rents. Therefore, using lease transactions to push to AV helps keep property taxes more stable for property owners.
7. How else can we tax wealth?
We tax wealth through property tax, stamp duty and additional motor vehicle registration fees. The higher the value of the house or car, the higher the tax.
