Source : Straits Times – 8 Jul 2009
A PROPOSED change to income tax laws will make clearer to property sellers when they will be taxed on their profits.
Anyone who sells only one property in any four-year period will not be taxed on his profit, according to a proposed amendment to the Income Tax Act.
But if he sells another property within four years of the first sale, the profit from the second sale may be taxable.
If the proposal becomes law, it will provide certainty for owners who now cannot be sure if the taxman will come calling after they sell.
Under existing rules, an individual does not pay tax on gains made from selling a property unless the taxman decides that he is trader – someone who buys and sells multiple properties within a short time span. And there is no way for the seller to know in advance if he might be deemed a trader.
The new way of taxing property profits is one of many changes listed in a draft Income Tax (Amendment) Bill 2009 put up for public feedback last month by the Finance Ministry.
If implemented, the change will take effect from January.
A ministry spokesman told The Straits Times yesterday that the proposed change aims to provide certainty of non-taxation to individuals who own property.
Once it takes effect, the individual who sells a property for a profit can be sure that his gains will not be taxed – provided he had not sold any other property in the previous four years.
If he sold other properties within that period, the spokesman said, the Inland Revenue Authority of Singapore (Iras) will decide whether he should be taxed, ‘based on the facts and circumstances, no different from the present tax treatment’.
Although Singapore does not have a capital gains tax, profits from selling property can be taxed at the appropriate individual income tax rates if Iras deems the seller to be a trader.
Tax and property market experts contacted by The Straits Times welcomed the move to clear the air over taxes on property sales.
Mr Tan Tiong Cheng, chairman of property consultant Knight Frank, said: ‘Since the Government has clarified that the treatment on capital gains would remain the same, it will be business as usual. Genuine investors will not be deterred from buying properties.’
A stockbroking director said that the Government’s assurance will calm any jitters investors might have experienced when they first learnt of the proposed tax change.
‘There were initial misgivings that this provision might be a roundabout way to introduce a capital gains tax on properties. The misconception has been cleared,’ he noted.
But others felt that by raising the issue of taxing property sales gains, the Government is also sending a signal to speculators that they can expect to be taxed if they buy properties to ‘flip’ for quick money.
During the property boom of 2007, some speculators could have bought and sold as many as half a dozen properties in the space of a year.
With the change, a property owner juggling several properties cannot sell more than one within a four-year period if he wants to be sure of avoiding a tax bill on his gains.
Since February, sales of new private homes have exceeded 1,000 units a month compared to a monthly average of 330 units last year. Worries are surfacing that speculators might be ramping up sales and driving up prices, as the economy recovers.
Businessman James Chen, 40, said the proposed change may make the short-term investor think harder before buying.
‘He will have to consider whether he wants to take such a risk and give up a part of the gains as taxes.’
The draft Bill can be read at the Finance Ministry website www.mof.gov.sg and the public has up to next Tuesday to give feedback.
The Bill is expected to go before Parliament later in the year.
TARGET OF CHANGES
‘He will have to consider whether he wants to take such a risk and give up a part of the gains as taxes.’ – Businessman James Chen, 40, on how the proposed change may make the short-term investor think harder before buying. A property owner juggling several properties cannot sell more than one within a four-year period if he wants to be sure of avoiding a tax bill on his gains.
No comments:
Post a Comment