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Inland Revenue Authority of Singapore
Image credits: Inland Revenue Authority of Singapore, Paul Ho, iCompareLoan.com

How to calculate Property Tax and Annual Value

By Si Jie,

Property Tax Singapore: Singapore has one of the highest home ownership percentage around the world. Around 9 in ten Singaporeans own a property in Singapore. As a home owner, you are obligated under Singapore law to pay for property tax on 31st January every year.

When you first bought your property, did you consider how property tax would affect you? Or did you only consider the features of your dream home that you want and the price it would cost? Many of us are guilty of making that mistake of just focusing on costs that we can see and ignoring the “hidden costs”. But “hidden costs” like property tax can affect your cashflow. Thus, as a (potential) property owner, you need to know your property tax and how it is being calculated!

To help Singaporeans, Singapore PR, Foreigners alike better understand how property tax in Singapore is levied on you, we came up with this guide at iCompareLoan to demystify property tax for you!

Property Tax Singapore? Who Needs To Pay For It?

In Singapore, property tax is a form of wealth tax. If you are in ownership of any property, you will be required to pay property tax. Even if you have rented out your property, you will still be obligated to pay your property tax. (P.S. If you are renting out your property, you will need to pay both property tax and income tax due to your rental income).

Since more than 90% of Singaporeans own a property, it is likely that you are one of them who needs to pay your property tax when it’s due.

Property tax is to help you. The richer you are, supposedly you will need to pay higher taxes, this is likely because more resources are being deployed for such properties, such as police patrol and other costs? Building parks and shelters also cost money, so if this enhances your rental, then I am sure Singapore's Inland Revenue Authority of Singapore (IRAS) wants a share of it.

When Is The Time To Pay My Property Tax?

You can make payment for your property tax anytime throughout the year. The only condition is that you need to pay it before 31st January every year. IRAS will send you reminders to pay your property tax, so we think it is hard for you to miss it. But what happens if you really miss the property tax payment?

If you missed the deadline to pay your property tax, a 5% penalty will be imposed on the unpaid property tax. If you are thinking of ignoring IRAS and act blur about your late property tax, here’s something you should know: The government has the power to get the tax from wherever it can. It can even access your bank account or your payroll. So, you can forget about trying to skip paying on your property tax.

How Much Is My Property Tax?

The next question that is on everyone’s mind is, “How much is my property tax going to be?”. The quick answer to that question is that your property tax can be calculated using this formula:

Your Property’s Annual Value x Property Tax Rate = Property Tax Payable

But to truly understand the essence of your property tax, you need to understand the two components: Property Annual Value and Property Tax Rate.

Property Tax Singapore - How does Annual Value affect the calculation?

Annual value is a very misleading term that seems to suggest it is the value of your property on an annualised basis. However, it isn’t that. The way IRAS estimates your property’s annual value is by taking an estimate of how much rental income your property can fetch in the year. In other words, IRAS is taking your property’s rental potential as an estimate of its annual value.

Firstly, IRAS will compare your property with similar or comparable properties to find suitable comparisons. Then, IRAS will take the monthly market rent of those units as an estimate of your property’s rental income. Finally, the annual value of your property is calculated by multiplying your property’s monthly market rent by 12. If you are renting out your property, IRAS will simply take your monthly rent and multiply it by 12 after deducting reasonable expenses for furniture and maintenance fees.

Finding Out Your Property’s Annual Value

There are two ways in which you can find out about your property’s annual value.

The first, and the easier way, is to log on to IRAS My-Tax-Portal. Through the portal, you can check up on the annual value of your property at any time. While the annual value can change within a year, it is hardly significant. Checking it once every 3 months should keep you up to date with your property’s annual value.

The other way is to do your own comparison. IRAS takes factors such as location, size, conditions and other physical attributes of the property in finding a reasonable comparison to your property to calculate the monthly market rent. By using the same factors, you can find similar properties and make a reasonable estimate of your property’s annual value.

Links: HDB Rental, Private Property Rental

property tax singapore

Image Credits: Property Tax Annual Value can paid through GIRO via instalment plan, IRAS, iCompareLoan.com

Can I Challenge IRAS’ Valuation Of Your Property’s Annual Value?

If you find that IRAS has not fairly determined your property’s annual value, which in turn affects your property tax, you can challenge them (link to appeal). This usually happens when the market has taken a sudden dip.

For example, such a dip was seen in 2009 after the global financial crisis. However, in order to make a successful appeal, you need to substantiate your claims to IRAS. You need to provide supporting documents to IRAS to show that the market values have indeed dipped.

property tax singapore

Image Credits: Sideview of Revenue House, Paul HO, iCompareLoan.com

What Is Your Property Tax Rate in Singapore?

The other factor in determining your property tax is your property tax rate. Singapore adopts a progressive property tax rate structure. This means that the more valuable your property is (determined by your property’s rental potential), the more property tax you are liable for.

There are two different types of property tax rate in Singapore. One is for owner-occupied property (OOP) and the other is for non-owner-occupied property (NOOP).

Private Apartment and Condominium Owner-Occupied Property Tax Rate

If you are staying in your property, the property tax rate that you are liable to pay is significantly reduced.

Table 1: Calculate your Annual Value of Property Tax in Singapore for Owner Occupied Tax Rate, iCompareloan, IRAS.

Case Study 1: Ah Tan, The Family Man

Ah Tan lives in his property with his family. This means that Ah Tan will be taxed under the OOP tax structure for his property tax.

Let’s say similar units to Ah Tan is able to fetch a monthly rent of $3,500 every month. With some simple calculation, Ah Tan’s property annual value is pegged at $42,000.  His total property tax payable to IRAS will be $1,360.

 

Scenario of a Property Tax

 

Table 2: Scenario of how your Annual Value (AV) determines how your property tax in Singapore is calculated, IRAS, iCompareLoan.com

Non-Owner-Occupied Property Tax Rate in Singapore

If you are not staying in your property, the property tax rate that you are liable to pay is significantly higher. This is because the general assumption is that you have rented out your property if you are not staying in it. What about situations where you have left it vacant? If you have left it vacant, it might be implying that you are rich enough to not require renting out your property, which explains why you are treated the same as those who have rented out the whole of their property.

 

Property Tax for Landlord

Table 3: Property Tax for Non owner occupied tax rate corrected to their Annual Value, IRAS, iCompareLoan.com

Case Study 2: Ah Seng, The Landlord

Ah Seng is a landlord who rents out his whole unit to a Chinese family. Unlike Ah Tan, since Ah Seng is renting out his whole unit, he will be taxed under the NOOP tax structure for his property tax.

Let’s say Ah Seng rents out his unit for $2,500 a month with monthly maintenance of $300 and rental furnishing of $1,200 per annum. This means that the market rent of his unit is $2,100. Thus, the annual value of his property will be $25,200.  His property tax payable will be $2,520 since he falls into the lowest tier based on his property’s annual value.

If you noticed, the difference in property tax between property occupants and non-property-occupants is quite huge due to the OOP and NOOP tax structure. It is more than double for non-property-occupants.

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Property Tax Singapore - Do not forget calculating it

Now that you have become a property tax guru, it’s time to put your knowledge to good use. The next time you are looking at a property, don’t forget to also consider the property tax that you need to pay.

Note: IRAS provides an interactive calculator for you to calculate your own property tax. But we encourage you to try calculating your own property tax to stimulate your brain cells and to double check the figures from IRAS. You never know when a bug might appear on IRAS’ website.