No tightening of tax policy
http://www.straitstimes.com/Prime%2B...ry_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.
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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.
Govt clears air over tax on property gains
http://www.businesstimes.com.sg/sub/...41299,00.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.
