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mr funny
08-07-09, 12:56
http://www.straitstimes.com/Prime%2BNews/Story/STIStory_400293.html

July 8, 2009 Wednesday

When to tax property gains: Law made clearer

By Goh Eng Yeow, Senior Correspondent


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.

[email protected]


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.

bargain hunter
08-07-09, 13:05
this is not an anti-speculative measure. however, it will make people think twice about speculating on properties. still, it won't deter first time homebuyers.

nonetheless, the correcting global stock markets should dent some buying confidence anyway.

bargain hunter
08-07-09, 13:52
reposted from "Property Market Sentiments?" thread.


According to a stockbroking research report,


The new

Section 10G states that an individual who
disposes of only 1 real property on any date on or
after 1/1/2010, and has not disposed of any other
real property within 4 years prior to the disposal
of the first property, shall not be taxed for any gain
arising from such a disposal. There is however no

provision for tax loss.


The new rule will also cover (a) options for new
property launches; and (b) part disposal of any real
property, eg strata units.

and its comment is:


Of bigger short-term concern however is the likely
impact of changes taking effect in January 2010 if
implemented: will this lead to “dumping” in the
coming months by buyers who are likely to be
deemed “traders”.

august
08-07-09, 14:02
Of bigger short-term concern however is the likely
impact of changes taking effect in January 2010 if
implemented: will this lead to “dumping” in the
coming months by buyers who are likely to be
deemed “traders”.


hooray! firesale coming! :D

bargain hunter
08-07-09, 14:11
first firesale those got profits one to clear before end 2009. next year forcesell those deferred payment ones. Woohoo!



hooray! firesale coming! :D

august
08-07-09, 16:05
if the purpose is to deter speculation, i propose imposing taxes on gains on shares trading too ~

:rolleyes: :D

jitkiat
08-07-09, 16:14
if the purpose is to deter speculation, i propose imposing taxes on gains on shares trading too ~

:rolleyes: :D
You are supposed to report your share trading income to IRAS. They don't catch you because your profit not big enough only. If you have huge profit doing share trading and never report to IRAS, good luck... if one day they discover or someone reports to them ... you are gone case ... everything goes through CDP ... proof readily available to sue you .. be very afraid, they can freeze all your bank accounts and invalidate your passport in no time

bargain hunter
08-07-09, 17:01
Quoted form Citigroup's research,

Impact — If implemented, it is likely to curb any excessive speculation in the
market. Speculators may try to get out of the market early before implementation
next year. However, this should not have any impact on genuine home buyers but
would certainly make investors/speculators think twice. We think there will be
downward pressure on the prices and volumes, especially new launches. New
sales of smaller sized units (which have been popular so far) are likely to slow.

blackswan
08-07-09, 18:30
Quoted form Citigroup's research,



Impact

— If implemented, it is likely to curb any excessive speculation in the



market. Speculators may try to get out of the market early before implementation

next year. However, this should not have any impact on genuine home buyers but
would certainly make investors/speculators think twice. We think there will be
downward pressure on the prices and volumes, especially new launches. New
sales of smaller sized units (which have been popular so far) are likely to slow.


Wonder how many people still think that a huge part of the recent rally isn't speculation......

More importantly, how will this work together with the huge impending supply coming on stream this year and next.

xtink
08-07-09, 19:18
can i clarify if this is applicable to HDB? i.e. u sell ur HDB, buy another one, and then you buy a new pvt property, and you sell ur new pvt property within the 4 yrs?

Or only applicable for pvt property?

bargain hunter
08-07-09, 19:45
i am not sure but does not seem to apply to hdb. afterall, you can only own 1 hdb. my own gut feel (i am no expert), your scenario seems safe.



can i clarify if this is applicable to HDB? i.e. u sell ur HDB, buy another one, and then you buy a new pvt property, and you sell ur new pvt property within the 4 yrs?

Or only applicable for pvt property?

bargain hunter
08-07-09, 19:49
hee, another smart measure to introduce such a subtle yet effective measure without the need for announcing anti-speculative announcements to cause a market panic.

this seems to be working well with the impending supply. those buyers still with profits rush to sell and lock in their profits now while deferred payment defaulters get forcesold next year. this is called progressive and gradual decline in prices ie soft landing which is better than a hard landing, ie prices crash like earlier this year.



Wonder how many people still think that a huge part of the recent rally isn't speculation......

More importantly, how will this work together with the huge impending supply coming on stream this year and next.

[/left]

blackswan
08-07-09, 21:30
hee, another smart measure to introduce such a subtle yet effective measure without the need for announcing anti-speculative announcements to cause a market panic.

this seems to be working well with the impending supply. those buyers still with profits rush to sell and lock in their profits now while deferred payment defaulters get forcesold next year. this is called progressive and gradual decline in prices ie soft landing which is better than a hard landing, ie prices crash like earlier this year.

Hard not to feel the timing is very well crafted. Am referring to from reading of the law till the implementation. Quite an ample time to do what is necessary.

But have to wonder if the recent buyers are foreigners and not so overwhelmingly locals, will the tax issues be clarify after such a long time?

bargain hunter
08-07-09, 23:05
that's true. add in our minister tharma who mentioned yesterday it is still a long road to recovery, i guess gahmen does not want locals to be carried away chasing property when there are more immediate issues at hand like, the lack of green shoots. i think while the effect may not be fantastic, the message they want to put across is clear. the timing i have to agree, just right.



Hard not to feel the timing is very well crafted. Am referring to from reading of the law till the implementation. Quite an ample time to do what is necessary.

But have to wonder if the recent buyers are foreigners and not so overwhelmingly locals, will the tax issues be clarify after such a long time?

ahlahdin
08-07-09, 23:18
I suggest you all read the article again.

The issue here is whether serial or professional traders of properties should have their income from profits taxed. This is income tax, not capital gains tax.

There is NO CHANGE in the tax on capital gains/profits.

This is aimed directly at us Singaporeans, whose income details are under the purview of the IRAS. Foreigners, other than US citizens I think, get off scot free?

jc
09-07-09, 00:37
The rule of taxing profits under income tax is always there, it is just that they clarify now the time frame. I think this is just knee jerk reaction as usual. If one earn $1, assume IRAS take $0.20, still have $0.80 mah.... What's the problem???? If one is of lower tax bracket, then pay even lesser... At the most increase selling px lor....

Condorich
09-07-09, 12:47
The rule of taxing profits under income tax is always there, it is just that they clarify now the time frame. I think this is just knee jerk reaction as usual. If one earn $1, assume IRAS take $0.20, still have $0.80 mah.... What's the problem???? If one is of lower tax bracket, then pay even lesser... At the most increase selling px lor....

Right... it will work itself back to the selling prices... pushing up the asking prices (factoring the tax payable). You are likely to see a scenario of higher asking prices with lower volume in closed deals.

It is likely to move from many property transactions in a year to 1 property transaction every 4 years. This should end the flipper market.

august
09-07-09, 15:35
can also increase stamp duty, flippers sure scare scare, gahmen can make more $$ ~ :o

mr funny
09-07-09, 17:36
http://www.straitstimes.com/Breaking%2BNews/Singapore/Story/STIStory_400981.html

July 9, 2009

No tightening of tax policy

By Goh Eng Yeow


THE Finance Ministry has clarified that its proposal to make the law clearer on taxing the gains on property sales gains is not intended to tighten current policy on the matter.

Rather, the proposed tax change is to relax the income tax treatment 'aimed at giving certainty of non-taxation' to individuals who do not sell properties frequently.

Since last month, the Finance Ministry has been getting feedback on a proposal to allow anyone, who sells only one property in any four-year period, to enjoy any gains he may make from his sales tax-free. The consultation on the proposed tax change ends next Tuesday.

But since news of the the proposal hit the street on Wednesday, there had been some confusion among investors as to what the proposed change might entail.

To clear the air, MOF came out with a statement on Thursday afternoon to assure investors that there is no change to the current and long-standing income tax treatment on individuals who have sold more than one properties within a four-year period.

The move is also not an anti-speculation measure, said the ministry.

'Whether individuals who sell properties more frequently are subject to income tax depends on the facts and circumstances of each case,' it said.

MOF stressed that 'there is no requirement that individuals must report to Iras for income tax purpose every time they sell their properties - this will also continue to apply going forward.'

Iras has alsways conducted its own audits on property transactions for possible cases of assessable income, it added.

The proposed tax change has come about, in response to feedback, and MOF is proposing this improvement as part of its regular review of the Income Tax Act.

mr funny
09-07-09, 18:35
http://app.mof.gov.sg/news_press/pressdetails.asp?pressID=375

NO TIGHTENING OF INCOME TAX POLICY FOR PROPERTY TRANSACTIONS

1 The Ministry of Finance wishes to clarify that the proposed change in the Income Tax public consultation document involves no tightening of the current income tax policy for individuals who sell their properties.

2 The only change proposed involves a relaxation of income tax treatment aimed at giving certainty of non-taxation to individuals who do not sell properties frequently. This has been in response to public feedback over the years as under existing practice, such certainty of non-taxation has not been provided.

3 The proposed change is therefore not an anti-speculation measure. It does not mean that individuals who have sold more than one property within a four year period will automatically be subject to income tax. There is no change to the current and long-standing income tax treatment in this regard. Whether individuals who sell properties more frequently are subject to income tax depends on the facts and circumstances of each case. IRAS has in the past brought to tax a small number of individuals -- who regularly transact in property, and whose gain from the disposals is assessed to be income.

4 Singapore does not have a capital gains tax, unlike many countries. Its income tax rules are merely aimed at taxing persons who make an income out of their property transactions. This income tax policy is common among tax authorities internationally, and our local practices are not unique.

5 There is no requirement that individuals must report to IRAS for income tax purpose every time they sell their properties – this will also continue to apply going forward. IRAS has always conducted its own audits of property transactions for possible cases of assessable income.

6 The only change being proposed in the Income Tax (Amendment) Bill 2009 is to provide certainty of non-taxation for individual owners who do not sell properties frequently. Specifically, when individuals sell their properties, they will be certain that the gains made from selling their properties will not be subject to income tax if they have not sold any properties in the preceding four years. The lack of certainty in the current rules presently for individuals who sell their properties had led to public feedback for more clarity of income tax treatment. In response to such public feedback, Ministry of Finance is proposing this improvement, as part of its regular review of the Income Tax Act.

7 More details of the Income Tax public consultation can be found here.

MINISTRY OF FINANCE
09 July 2009

jitkiat
09-07-09, 20:33
No wonder property stocks rebounded with high volume ... :doh:

jc
09-07-09, 23:44
Right... it will work itself back to the selling prices... pushing up the asking prices (factoring the tax payable). You are likely to see a scenario of higher asking prices with lower volume in closed deals.

It is likely to move from many property transactions in a year to 1 property transaction every 4 years. This should end the flipper market.

U still don't understand. IRAS has to deem u as a property trader. Nothing to do with Flipper. :doh:

Condorich
10-07-09, 09:33
U still don't understand. IRAS has to deem u as a property trader. Nothing to do with Flipper. :doh:

Yes, may be a case of wrong understanding. More flippers if you wish.. I like flippers.. flip flip!

:cheers6:

Anyway the words used are 'May be subjected to tax'. But it is not so clear on who will be subjected.

The proposed change is therefore not an anti-speculation measure. It does not mean that individuals who have sold more than one property within a four year period will automatically be subject to income tax. There is no change to the current and long-standing income tax treatment in this regard. Whether individuals who sell properties more frequently are subject to income tax depends on the facts and circumstances of each case.

mr funny
10-07-09, 13:46
http://www.businesstimes.com.sg/sub/news/story/0,4574,341299,00.html?

Published July 10, 2009

Govt clears air over tax on property gains

Ministry says proposed change aimed at giving certainty and is not a move against property speculation

By EMILYN YAP


(SINGAPORE) Has the market worked up a storm in a teacup over a suggested change to income tax laws on gains from property sales? Keen to quell rumours about an anti-speculation drive, the Ministry of Finance (MOF) clarified yesterday that the proposal is unlikely to lead to more individuals being taxed.

Still, some industry watchers believe that the potential change is enough to worry property investors - many of whom have returned to the market only recently.

Currently, property sellers do not pay tax on gains unless the Inland Revenue Authority of Singapore (IRAS) sees them as traders and treats the gains as income. The IRAS makes its decision on a case-by-case basis, considering factors such as why the properties were sold, how long the sellers owned them and how frequently the sellers transacted properties in the past.

These factors are derived from case law and are not clear-cut. According to MOF's statement, just 'a small number of individuals' have been taxed on gains from property sales in the past.

There are individuals who want greater clarity on whether their gains will be taxed, MOF said. Responding to feedback, it proposed last month a condition that would guarantee no tax: An individual who sells a property on or after Jan 1, 2010 will not be taxed on the gains if he has not sold any other property in the previous four years.

This is actually 'a relaxation of income tax treatment aimed at giving certainty of non-taxation to individuals who do not sell properties frequently', MOF explained.

The proposal does not mean that those who sold more than one property within a four-year period will definitely be taxed on the gains. In line with existing arrangements, IRAS will still assess these cases individually. 'There is no change to the current and long-standing income tax treatment in this regard,' MOF pointed out.

MOF did not reveal the exact number of individuals who have been taxed on gains from property sales. But it said in an email to BT: 'If the proposed change is implemented, MOF does not expect the number of cases to increase. This is because the change does not involve a tightening of the rules.'

In fact, 'the number of cases may fall if all things remain constant' after the change, it says.

Rumours that the government was trying to curb speculation in the property market gained ground after news of the potential change got round. Property sales have been buoyant since February this year, and selling prices in some projects are said to have risen by a few per cent. Some market watchers attributed the improvement in part to the return of speculators.

In its statement, MOF emphasised that the proposed change is not an anti-speculation measure. It also reiterated that Singapore does not have a capital gains tax.

MOF's clarification has soothed the market somewhat. On Wednesday, fear that investors could exit the property market and perhaps confusion over the proposal had pushed prices of several property counters down. The selling pressure eased notably yesterday. City Developments, for instance, gained 43 cents to close at $8.31, while CapitaLand rose 12 cents to $3.50.

Despite the official reassurance, there are still nagging worries that the potential change to income tax laws could hurt investor sentiment, particularly in the prime property sectors.

'Demand for mass-market homes should hold, backed by HDB upgraders, while mid to high-end segments may experience slower take-ups from reduced speculative interest,' said AmFraser Securities analyst Lau Wei Chong in a note yesterday.

There are also industry watchers who stand by the anti-speculation theory. 'We remain believers of the idea that the government may be sending out a signal through this proposal to cool property transactions, especially in the high-end,' said CIMB analyst Donald Chua in a note.

To curb speculation in the property market in 1996, the government had imposed income tax on gains which individuals made from selling properties within three years of purchase. It lifted the rule in 2001.