In the pursuit of building a fairer and resilient taxation system, Finance Minister, Lawrence Wong, in his 2022 budget speech announced that higher property tax will be levied on residential properties in phased manner over two years effectively from 1 Jan 2023.
Property Tax on residential property is currently the principal means of taxing wealth in Singapore.
The increase in property tax will raise the city-state’s property tax revenue by around $380 million.
Understanding the move
The increase in Property tax rates, aside from the introduction of property cooling measures announced in Dec 2021, included tightening of Loan-to-Value (LTV) limit for HDB-granted loans from 90% to 85%; tightening of Total Debt Servicing Ratio (TDSR) threshold from 60% to 55%; and a hike in ABSD (Additional buyer’s stamp duty) rates. These aim to ensure a stable and sustainable residential property market in Singapore amidst the sudden boom in residential market space last year, with prices surging the most in more than a decade. Sales of high-end bungalows- the city’s equivalent of mansions tripled in 2021, according to Knight Frank (Faris Mokhtar, 2022).
Property tax Calculation
The property tax is calculated based on the Annual Property Tax which is determined by multiplying the annual value with the property tax rate.
– What is Annual Value?
Annual value is the estimated gross annual rent of the property if it were to be rented out, excluding furniture, furnishings and maintenance fees. It is determined based on estimated market rentals of similar or comparable properties and not on the actual rental income received (IRAS, n.d).
– Residential Property tax rates- Existing v/s Proposed
The property tax rate in Singapore is progressive and there are different tax rates for owner-occupied and non-owner-occupied residential properties.
Residential Property tax treatment
– Owner Occupied Residential property
The progressive PT rates for owner-occupied residential properties will be revised for the portion of annual values (“AVs”) in excess of $30,000 (Ministry of Finance, 2022). This change will be phased in over two years as shown below, starting with PT payable in 2023.
The final tax rates of up to 32% will take effect for PT payable from 2024.
The impact of the PT rate changes for owner-occupied residential properties is illustrated below.
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– Non owner occupied Residential property
The impact of the property tax rate changes for non-owner-occupied residential properties is illustrated below.
Property Tax Payment Due Dates
The annual property tax bill must be paid by 31 Jan. All other property tax notices must be paid 1 month from the date of notice (IRAS, n.d).
Impact of hike in residential property taxes
While some say that the impact of the new rules will be minimal on the overall residential market, others believe that extra property tax targets the super wealthy and is a blow to investors owning multiple properties. Proper tax planning and incorporating property tax rebates and reliefs as allowed by the Singapore government would help us plan our portfolio better.
Frequently Asked Questions
Those taking out HDB loans are affected by the tightened LTV limits, while all HDB buyers are affected by the lowered TDSR.
A 5% late payment penalty will be imposed on the unpaid tax if full payment is not received by the due date and if the taxpayer is not on an approved installment plan.
For residential property which is owner occupied, the owner can enjoy lower property tax rates.
Yes, you have to notify IRAS in writing within 15 days from the date of the change.
If you are facing financial difficulties in paying your property taxes, you can contact the IRAS and put in a request to make your payment via installments. These cases are however only approved on a case-to-case basis.