Ministry clarifies report on property taxes

Sep 3, 2012 - PropertyGuru.com.sg

By Romesh Navaratnarajah:

In response to a recent article on PropertyGuru entitled ‘Singapore property taxes 2nd highest globally’, the Ministry of Finance has issued a clarification that the report by Savills called ‘World Cities Review’, does not reflect the low property taxes paid by the vast majority of Singapore property owners.

The research by Savills focuses on the cost a foreigner investing in the Singapore market will likely bear on buying, owning and selling a property in Singapore.

Owner-occupied homes enjoy a concessionary progressive tax rate of zero percent for the first S$6,000 AV (Annual Value), four percent for the next S$59,000 and six percent for AV exceeding S$65,000. Based on the report, the annual occupation tax in Singapore is about S$58,000 for a Savills Executive Unit (SEU) made up of one middle-aged expatriate CEO, one senior expatriate director, a locally employed director and four locally-employed administrative staff – a total of seven people. The average annual property tax payable by each person in the SEU for one property is S$8,286 (S$58,000 /7). The AV of such a property works out to be about S$164,000 – a very high-end property with an estimated market price of S$7 million. Properties with such AVs fall within the top 0.1 percent of all owner-occupied residential property in Singapore.

In fact, about 86 percent of all owner-occupied residential properties in Singapore have an AV of below S$20,000. The annual property tax payable for the majority of homeowners thus ranges between zero to S$560, which translates to zero to 2.8 percent of AV.  The property tax of a typical five-room HDB flat with an AV of S$11,700 is about S$228 or 1.9 percent.

The report also factored in the cost of the additional buyer’s stamp duty (ABSD) of 10 percent on a foreigner’s purchase of residential property in Singapore.  ABSD of three percent is chargeable on permanent residents (PRs) and Singaporeans who already own one and two properties respectively. ABSD was introduced to moderate investment demand for residential property and to promote a more stable and sustainable market.  Most Singaporeans own only one or at most two properties and will not have to pay ABSD.

To deter speculation, when a property is disposed within four years of purchase, a Seller’s Stamp Duty (SSD) of 16, 12, eight or four percent is imposed, depending on the holding period of the property. SSD is not payable for the majority of owners who are long-term occupiers and hold on to their properties beyond four years.   

Hence a typical Singaporean household enjoys low property tax rates and is not affected by ABSD and SSD.