Tax on Rental Income and Disposal of Property in Singapore

1. Tax on Rental Income

Rental income generated from renting out your property is taxable. Expenses may be claimed against rental income to save tax.

Under the Income Tax Act, 'any other profits arising from property' are also taxable. These include net annual value (NAV) of property used by or on behalf of the owner for residential purpose and not for the purpose of gains or profits.

If you own and occupy more than 1 property for residential purpose or have properties occupied rent-free by friends or relatives, the NAV of the properties will be subject to income tax. NAV is the annual value shown on your property tax bill less allowable expenses.

NAV = Annual Value (AV) ?Allowable expenses

2. Rent and NAV from property

Rent received from the letting of property in Singapore is subject to income tax, while your property is subject to property tax. Your rental income includes rent of the premises, maintenance, furniture and fittings. After deductions for allowable expenses (such as property tax), the net amount is taxable.

Gross rent ?Total allowable expenses = Net taxable rent

When is it taxable?

Rental income is taxed on the date it is due and payable, and not the date of actual receipt.

Example

Your tenant rented your property from Oct to Dec 2009. However, he only paid the rent for that period in Jan 2010.

You need to declare the rent for Oct to Dec 2009 in the Year of Assessment (YA) 2010 as the rent was due to you in 2009.
For jointly owned property

The rental income is taxed on all the joint owners based on their share in the property. It does not matter which party receives the rent or whether the owners paid for the property.

This also applies to rental loss. The rental loss is apportioned to joint owners based on their share in the property.

3. Rental and NAV expenses

Rental expenses are expenses which are wholly and exclusively incurred in the production of your rental income. These expenses can be deducted from your rental income, which helps you to save tax.

Rental expenses

For an expense to be deductible from rental income derived in Singapore, the expense must be incurred:

• Solely for the purpose of producing the rental income; AND
• During the period of tenancy.

4. Gains from sale of property

Generally, the gains derived from the sale of a property in Singapore is not taxable as it is a capital gain.

When is it taxable?

When a person is deemed to be trading in properties, the gains from the sale of property in Singapore is income and it is taxable. As to whether a person is deemed to be carrying on a trade, it depends on the circumstances of that individual.

To determine if a person is trading in properties, IRAS applies a set of guidelines known as the "badges of trade". There are criteria under the badges of trade and IRAS considers all facts of each case to determine whether the gains are taxable.

Examples of the criteria are as follows:

• Frequency of transactions (buying and selling of properties)
• Reasons for acquiring and selling of property
• Financial means to hold the property for long term
• Holding period