• All blog entries
    • Calculators
    • Case studies
    • Cost of living
    • CPF Are You Ready?
    • CPF Matters
    • Credit Management
    • e-Learning
    • Estate Planning
    • Events
    • Financial advisers
    • High Networth
    • Insurance
    • Investments
    • Letters to the Press
    • Magazines
    • Others
    • Retirement Planning
    • Scams
    • Surveys
    • Tragic Stories
    • Unethical sales process
    • Videos
  • Legal
  • Testimonies
    • Individual testimonies
    • Gallery
  • My Account
Hi, looking for a fee-based financial planner in Singapore? Read this article now!
  • Home
  • About
    • About Wilfred Ling
    • Why do you run your own professional financial planning practice?
  • FAQs
    • FAQs on Wilfred Ling’s Financial Services
    • FAQs on Financial Planning
    • FAQs on Investments
    • FAQs on Insurance
    • FAQs on Estate Planning
  • Services
    • Overview
    • Create a financially secure plan for your young family (package details)
    • Retirement Planning
    • Investment Portfolio Management
    • Insurance Planning
  • Fees
  • Cool Tools
  • Contact
  • Subscribe
You are here: Home / Tax Planning / Property Tax in Singapore and why it is declining?

Property Tax in Singapore and why it is declining?

27, December 2014 by Wilfred Ling 2 Comments

property taxAs we come to the end of the year, many would have received a statement on the property tax. What is property tax and why do you need to pay?

Property Tax as a wealth tax

Property Tax is known as wealth tax. A wealth tax is based on a percentage of the entire asset base. An example of wealth tax is the Additional Buyer’s Stamp duty. A Singaporean purchasing a second property will be subjected to additional stamp duty of 7% of the value of the entire purchased property or valuation whichever is higher.

Another example of wealth tax is inheritance tax or estate duty which countries like Japan, United States and United Kingdom still practice. United States’ estate duty is 40% of the entire estate in excess of just US$60,000 for non-US tax residents.  This means a Singaporean who has a portfolio of US$1,000,000 in US stocks will only be worth 1,000,000 – (1000000-60000)*0.40 = $624,000 upon his demise. This is equivalent to 37.6% in immediate losses upon his death!

Unlike the one-time levy for Additional Buyer Stamp Duty and inheritance taxes, property tax in Singapore is levied annually.

Property Tax is one of the ways which the government collects its revenue. Goods and Services Tax (GST) and Income Tax are other ways which the government obtain its revenue.

How is Property Tax calculated in Singapore?

The amount payable for property tax is a two-step process.

First, the Annual Value of the property has to be determined. The Annual Value is the estimated annual rent of your property if it were to be rented out, excluding the furniture, furnishings and maintenance fees.  It is estimated based on market rentals of similar or comparable properties.

From my empirical observation, the Annual Value used by IRAS appears to be always below market rate. For example, one of my client’s Annual Value for 2015 is $11,340. On the other hand, the market value if it was rented out is $30,600.

The second step is to apply a progressive tax rate. For 2015 and using $11,340 as the Annual Value, an owner occupied property tax is (11340-8000) * 4% = $133.60. If the property is not occupied, the property tax payable is 11340 * 10% = $1134.

As the market value of the same property is $537,000, the effective tax rate is 133.60/537000 = 0.0249% and 1134/537000 = 0.211% for owner occupied and non-occupied respectively.

Personally I find it weird that the calculation has to be based on the Annual Value rather than the market value of the property given that property tax is a wealth tax.

By the way, do not forget that if the property is actually rented out, income tax is payable on the rent collected.

Why bother about property tax?

First, property tax is compulsory. Not paying property tax is illegal.

Second, if the property is actually rented out, property tax reduces the income yield of the property. For example, if the property rental yield is 5.7%, the rental yield drops to 5.489% after taking into account of property tax. If you take into account of income tax, the yield further deceases.

Why property tax is declining?

It was reported recently ("Reduction in property tax for those in bigger HDB flats" on 8th December 2014) that property tax will decline for HDB households. This is due to the lower Annual Value as rents are declining.

Like this article? Subscribe to my newsletter below for more.

Get regular Tips on Financial Planning. Free subscription for 3 years. Covers all aspect of financial planning such as 'How much salary you should have?', 'How to avoid insurance that is not suitable?", 'What are the retirement planning methods?", etc

Share this:

  • Tweet
  • Print

Related

Filed Under: Tax Planning

Comments

  1. xyz says

    28, December 2014 at 2:43 pm

    So far the drop in property tax from 2014 to 2015 is only about 7% to 8%. More drops to come in the next 3 years when 100,000++ new units come on the market. Plus a major recession hitting within next 3 yrs. Stocks will do very well within next 12 months. Just maintain your moving stop losses.

    Reply
    • kuku says

      5, January 2015 at 5:13 pm

      Why private went up 50% instead?
      Subsidising new comers?

      Reply

What do you think? Leave a comment. Cancel reply


WILFRED LING, CFA

WANT TO GET REGULAR TIPS ON FINANCIAL PLANNING?

JOIN with thousands of other subscribers in getting tips on all aspect of financial planning such as "What is the minimum salary required?", "How avoid insurance that is not suitable", etc.


WILFRED LING IN THE NEWS

Click HERE to find out more.


THE KIND OF CLIENTS I AM LOOKING FOR

NEW TO US?

Learn how you can fully benefit from this massive website: HERE

For Registered Users Only (free)

  • How and what to invest now? (Webinar) 28/7/2022
  • How to identify high performing unit trusts in 3 steps (Webinar) 3/9/2021
  • Financial Planning – Christian Perspective Part 2 (Webinar) 14/8/2021
  • How and what to invest now? (Webinar) 22/7/2021
  • Financial Planning – Christian Perspective Part 1 (Webinar) 10/7/2021

View All

For Clients Only

  • Video Message to Clients 30/12/2021
  • Exclusive client-only Investment Update Webinar by Wilfred 26/11/2021
  • JPMorgan Guide to Market Q2 2020 15/4/2020
  • JPMorgan Perspective Q2 2020 15/4/2020
  • JPMorgan Guide to Market Q1 2020 5/2/2020

View All

Top Posts

  • Strange way of how CPF Interest is calculated & retirement planning CPF has a rather strange way of calculating interest. I...
  • Access Information & Sign Up Page
  • Why are your prospects paying expensive investment courses instead of consulting you?   This video is for financial advisers. However...
  • List of all blog articles
  • AIA Pro Achiever 2.0 and my recommendations AIA Pro Achiever 2.0 was a product which someone recent...

Recent comments

  • Sinkie on Why Vanguard Fund Investors Underperformed The Fund Significantly?
  • Sinkie on Why You Always BUY HIGH In Investments?
  • honest_me on Cancer patient ends up with $33,000 bill after insurer refuses to pay for drug & what you must do to avoid this situation
  • susan on Single Premium NTUC Income SAIL
  • susan on Single Premium NTUC Income SAIL
  • LittleTiger on Nomination in insurance policies

To be notified of new blog post, like this facebook page

To be notified of new blog post, like this facebook page

Read articles based on different categories

Investment Login

iFAST Central: Login

iFAST Prestige: Login

Navigator: Login

Chartered Financial Analyst

CFA

Chartered Financial Consultant

ChFC

Featured Blogger

IM$avvy

© Copyright 2006-2022 Wilfred Ling

This advertisement or publication has not been reviewed by the Monetary Authority of Singapore

hollow-nasty
hollow-nasty
hollow-nasty
hollow-nasty