MOVING TO SINGAPORE

Dear foreign investors,

Looking to invest in the Singapore prime luxury real estate? Buying real estate is easy but making good capital gains from real estate is not. Many foreign investors come to Singapore to buy out many properties but only to realize that they had made the wrong investment choices.

To be successful in making good capital gains, investors need to understand the intricate details between one property from another. Also, there are new rules on real estate investment in Singapore which you may not be aware of. From our years of actively marketing and investing in Singapore luxury real estate, we are well positioned to assist you in your real estate investment.

Please browse through the information on foreign ownership, taxation and financing & other expense.  Should you are keen to invest or learn more about Singapore luxury real estate, please contact us via the Contact Button. There is no obligation.

Guidelines on Foreign Ownership of Singapore Private Residential Properties

What is non-restricted residential property under the Residential Property Act?

In general, foreigners are not restricted from buying any apartment within a building; any flat or dwelling-house in an approved condominium development under the Planning Act. However, a foreign person is not allowed to buy all the apartments within a building or all the units in the condominium development.

What is restricted residential property under the Residential Property Act?

Foreign persons (including natural persons, companies and societies) are restricted from purchasing restricted residential property within the meaning of the Residential Property Act. Such property includes:

Approval will have to be obtained from the Minister for Law to purchase a restricted residential property.

The Land Dealings (Approval) Unit administers the provisions of the Residential Property Act and its rules by:

processing applications from foreign persons and foreign companies for approval to acquire or retain restricted residential property;

issuing clearance certificates to Singapore companies and societies;

prosecuting offences under the Residential Property Act; and

dealing with general enquiries relating to the operation of the Act.

Under the Act, a foreign person is defined as a:

Guidelines on Singapore Private Residential Property Taxation

What kind of tax do I have to pay for purchase of private residential property?

All purchasers have to pay a stamp duty tax equal to (the purchase price x 3%) – $5,400.

For example, a $1mil SGD property

= $1,000,000 x 3% – $5,400
= $30,000 – $5,400
= $24,600

The stamp duty tax is payable upon completion of the property transaction.

What are the Property Tax Rates?

The annual value is determined by Valuation Review Board of the IRAS usually based on a average rent of similar properties. The property tax is payable upon 1 month from the completion of the purchase of property and every January subsequently.

Do I have to pay capital gain tax?

Currently, there is no capital gain tax. In fact, the Singapore government encourages foreign investments in property.  However, sellers need to pay sellers’ stamp duty of 16%, 12%, 8% and 4% of the selling price if the property is sold within 1,2,3 and 4 years of purchase respectively.

Rental Income

1. How do I declare rent income received from my property?

You have to report the total rent received from the tenant. Total rent includes charges on the property, the furniture and fittings and service charges.

If you are claiming expenses on the property, you need to show the details of the expenses claimed. Generally, you can only claim expenses incurred during the period of tenancy. Expenses incurred outside the period of tenancy cannot be claimed. However, if you can show intention to let out the property, we may consider the expenses.

The total rent and deductible expenses claimed must be reported when filing your income tax. You will be taxed on the net rent, which is the total rent less total deductible expenses.

2. What expenses are deductible from my rent/net annual value (NAV) for income tax purposes?

The following are deductible for income tax purposes.

· interest on your mortgage loan

· property tax

· fire insurance on your property

· repairs and maintenance which can include painting, pest control, and monthly maintenance charges to management corporations

· commission paid on getting a subsequent tenant

· cost of renewing a lease or getting a new tenant (except for the first tenant)

The following are NOT deductible for income tax purposes.

· mortgage or bank loan repayments

· agent’s commission, advertising, legal costs, for getting the first tenant

· depreciation of furniture and fixtures

· costs of renovation, additions, and alterations to your property, for example extension of car porch, construction of drains, cementing of walls and floors, and installation of window grilles

3. Do I need to submit receipts and documents together with my income tax form to support my claim for deductible expenses?

You do not need to submit supporting documents together with your income tax form. You are however, required to keep these documents for 7 years for verification purposes.

4. If my total rent is less than my deductible expenses, do I need to report my loss in rent in the income tax form?

Yes, you have to report your total rent and details of the deductible expenses in your Income tax form even if you made a loss in rent.

5. Can I deduct last year’s loss in rent against this year’s gain in rent or against other income?

No, you cannot deduct the loss in last year’s rent against this year’s rent. You also cannot offset the loss in rent against any other income you may have.

6. I own two properties. Can I deduct my loss in rent from property A against the gain in rent from property B?

Yes, you can deduct the loss in rent from property A against the gains in rent from property B if both properties are treated as a single source of income for the same calendar year. You will only be taxed on the net gain from these two properties. If the final amount is still a loss, you cannot offset this loss in rent against any other income you may have.

7. I own a property with my brother at half share each. We received rent of $6,000 for Jun-Dec 2002 and $30,000 for Jan-Dec 2003. The expenses were $7,500 for Jun-Dec 2002 and $17,000 for Jan-Dec 2003. Hence, we have made a loss of $1,500 for Jun-Dec 2002 and a gain of $13,000 for Jan-Dec 2003.

a. Can I report all the rent from Jun 2002 – Dec 2003 in the Income tax return for Year of Assessment 2004?

No. You need to apportion the total rent and the deductible expenses according to your share in the property for each calendar year. You need to show separately how you arrive at the loss or gain in the Income tax return for Year of Assessment 2003 and again in the Income tax return for Year of Assessment 2004.

b. Can I report all the rent under my name?

No. As your brother is a co-owner of the property, he must also report his share in his Income tax form.

You will have to declare the rent according to your share in the property. Since you and your brother each own a half share of the property, you will report a loss of $750 ($1,500 / 2) in the Income tax return for Year of Assessment 2003 and a gain of $6,500 ($13,000 / 2) in the Income tax return for Year of Assessment 2004.

8. My tenant paid the rent for Oct-Dec 2003 only in Jan 2004. Do I include this amount in my Income tax return for Year of Assessment 2004?

Yes. You need to include this amount as the rent was due to you in 2003. It does not matter if the rent was received at a later date.

If you have already submitted your Income tax return for Year of Assessment 2004, you can write to IRAS informing us of the rent you received.

9.What is the tax rent for rent income?

Rent income is taxable at 20% with effect from 2005.

Guidelines on Singapore Private Residential Property Loans
Can I take a loan if I am a foreigner? What is the maximum financing (loan) amount?

As a foreigner earning foreign income, you can loan up to a maximum of 75% of the purchase price of the property subject to property valuation by the lenders. From our experience, majority of our clients can secure loans of 70%.

Can I take a loan if I am a foreigner?

As an established real estate agency, we can help you secure a loan for property purchase from one of the major banks.

What is the maximum financing (loan) amount?

As a foreigner earning foreign income, you can loan up to a maximum of 80% of the purhcase price of the property subject to property valuation by the lenders. From our experience, majority of our clients can secure loans of 70%.

What are the types of bank loan available?

The loan can be fixed rates or floating rates.

What are the other expenses involved in investing in Singapore properties?

Legal fee – You have to pay for a one-time legal fee of about $3000 SGD per transaction. However, the bank usually provide full legal subsidy if you take up a loan subject to the bank’s terms and conditions.

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