Second Reading Speech by Second Minister for Finance Lawrence Wong on COVID-19 (Temporary Measures) (Amendment No. 3) Bill, at The Parliament, 3 November 2020

Part 6: Temporary Measures Concerning Remission of Property Tax

1. Mr Speaker, let me touch very briefly on the provisions in this Bill pertaining to the remission of Property Tax. Members will recall that to help businesses affected by the COVID-19 pandemic, the Government introduced a Property Tax Rebate for the Year 2020 for non-residential properties, in the Unity Budget on 18 February 2020. This was later enhanced in the Resilience Budget on 26 March 2020.

a. Depending on the category of non-residential property, owners are granted a Property Tax Rebate of 30% to 100%. For example, a shop is granted 100% Property Tax Rebate, which is equivalent to approximately 1.2 months of rent.

b. Property owners are also required to fully pass on the benefit of the rebate to their tenants within the prescribed timelines[1]. This obligation is provided under Part 6 of this Act and the COVID-19 (Temporary Measures) (Transfer of Benefit of Property Tax Remission) Regulations 2020, or the “PT Rebate Regulations”, which came into force on 13 May 2020.

2. Later on, to further support tenants, the Government introduced the Rental Relief Framework, and that came into force on 31 July 2020. Specifically, if the tenant-occupier[2] is a Small and Medium Enterprise (SME) or a specified Non-Profit Organisation (NPO), the Rental Relief Framework effects rental waiver[3] for the period from April to at most July 2020, depending on the type of property[4].

a. For example, the owner of a shop is required to waive up to 4 months of rent for his eligible tenants, for the period April to July 2020[5].

b. The Government co-shares in this mandated rental waiver, by providing support through the Property Tax Rebate and a Government cash grant[6]. For example, for a shop, the support by the Government, through the rebate and the grant, is about 2 months, or about half of the 4 months of rental waiver which the shop owner is required to waive for his eligible tenants.

3. The issue that arises is that the existing PT Rebate Regulations do not take into account the Rental Relief Framework. And this could result in unintended consequences, such as when there is a change of tenants during the year and the property owner is subject to the Rental Relief Framework.

4. The provisions in this Bill enable the Minister for Finance to make new or revised regulations, so as to ensure that the obligation to pass on the benefit of the Property Tax Rebate will take into account the rent waived under the Rental Relief Framework.

5. These regulations are needed to ensure that the property owner will not become unduly worse off by having to pass on the benefit of the Property Tax Rebate to his tenants, on top of the rental waiver that is effected under the Rental Relief Framework.

6. To give an illustration of how such an inadvertent consequence may arise, let’s assume there is a change in tenants during the course of the year, with Tenant A occupying the shop premises until July 2020, and then Tenant B comes in to occupy the premises from August 2020 onwards:

a. If Tenant A is a SME, the shop owner is to waive up to 4 months of rent for Tenant A, from April to July 2020, under the Rental Relief Framework. The owner should have then fully satisfied his obligation to pass on the benefit of the Property Tax Rebate of about 1.2 months of rent, as well as some of the cash grant.

b. But under the existing PT Rebate Regulations, the owner is also required to pass on the benefit of the Property Tax Rebate to Tenant B, pro-rated at about 0.5 month.

c. This is not the intended outcome. This is because the owner had already waived 4 months of rent for Tenant A under the Rental Relief Framework and passed on the benefit of the Property Tax Rebate to Tenant A. So, the owner should not need to pass on any benefit of the Property Tax Rebate to Tenant B. That’s why the Bill provides regulations to be made retrospectively, to ensure that this position is maintained.

d. And if the owner has already passed on the benefit of the Property Tax Rebate to Tenant B, this Bill will also allow regulations to be made to allow the owner to recover excess amounts from Tenant B in such circumstances.

7. So, really, the provisions are here to ensure that the intended policy outcomes are effected and there is no undue burden on property owners.

8. Details of the regulations will be provided through subsidiary legislation and on IRAS’s website when ready.

9. Thank you, Mr Speaker.

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[1]Generally, by 31 July 2020, for the benefit of the Property Tax Rebate for the months of January to June 2020; and 31 December 2020, for the benefit of the Property Tax Rebate for the months of July to December 2020.

[2]Tenant-occupier in the Rental Relief Framework refers to the final end-tenant, after tracing through the property owner, the property owner’s own tenant, and subsequent sub-tenants (if any). One of the conditions for a property owner to be subject to the Rental Relief Framework is that the tenant-occupier is a SME or a specified NPO.

[3]Rental waiver under the Rental Relief Framework is effected by operation of law upon the property owner’s receipt of a notice of cash grant from IRAS. From early August 2020, IRAS has been issuing a notice of cash grant to qualifying property owners, and the majority of owners would have received the notice by mid-August 2020.

[4]Qualifying tenancies are (a)(i) entered into before 25 March 2020; or (ii) entered into before 25 March 2020 but expired and renewed either automatically or in exercise of a right of renewal in the contract; and (b) in force at any time between 1 April and 31 July 2020 for qualifying commercial properties, and between 1 April and 31 May 2020 for other non-residential (e.g. industrial and office) properties.

[5]Under the Rental Relief Framework, if the property is an office or industrial property, the obligation is to waive up to 2 months of rents, for Apr to May 2020. The corresponding PT rebate is 30% for office or industrial property – this is about 0.36 month of rent. The Government cash grant for an office or industrial property is about 0.64 month of rent. So, for an office or industrial property, the total Government support is about 1 month of rent, or about half of the mandated 2-month rental waiver for such property.

[6]For a shop, this support by the Government is about 2 months of rent, i.e. about half of the mandated 4 months of rental waiver under the Rental Relief Framework. Approximately 2 months of support is provided through the Property Tax Rebate (about 1.2 months of rent) and a Government cash grant (about 0.8 month of rent).