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Property tax is a tax on property ownership; not on income earned from property

13 Mar 2012

We refer to the letter by ?????, “??????????” (LHZB, 7 March 2012).

????? highlighted that under the income tax regime, a person with income below a threshold  has nil income tax liability. He pointed out that similarly, we should regard owner occupied flats with no rental income as having zero annual value and that imposing any property tax would not be fair.

We wish to clarify that property tax is a tax on property ownership as a form of wealth. It is not a tax on income from a property. It is therefore levied irrespective of whether the property is owner-occupied or rented out.  Property tax, as a wealth tax, is part of our system of redistribution. Together with our income tax regime, it is an important part of our progressive fiscal system.

The property tax is adjusted regularly to reflect the change in market values of the property. The tax is calculated on the "annual value" of the property. To determine this annual value, for both owner-occupied properties or those rented out, market rentals of similar or comparable properties are used as a proxy.  This practice of using market rents to determine the annual values and property tax is similar to international practice in countries such as Hong Kong and Malaysia.

A property is taxed at a standard rate of 10% of its annual value. However, owners who live in their homes enjoy concessionary tax rates on such properties,  that is on a progressive scale of 0%, 4% and 6% depending on the property's annual values.

Rental income, on the other hand, is subject to income tax just like other incomes.  Owners who let out their properties would therefore also have to pay income taxes on their rental incomes.

We would like to thank ????? for his feedback and the opportunity to clarify.

Lim Bee Khim (Ms)
Director (Corporate Communications)
Ministry of Finance