Property tax rise for hotels

AS HOTEL room rates in Singapore continue to set new highs, the taxman’s upcoming formula tweaks — which will see hotels’ property tax bills jump by at least 33 per cent — will skim some of the cream off the cake for hoteliers.

The increase arises from a change to the formula used to calculate the annual value (AV) of hotels, which will kick in next year.

And analysts say that while the taxman’s move to keep up with the buoyant tourism and property sectors will certainly reduce hotel profit margins, the market itself won’t be thrown off beat.

Cushman and Wakefield’s managing director Donald Han pointed out that average room rates have gone up by some 20 to 30 per cent in the first 10 months, as demand continues to outstrip supply and major hotels see more than 90 per cent occupancy. Consequently, he said, “the taxman has to look into ways of making tax collection more transparent and equitable”.

Indeed, the tourism industry here is experiencing a helium boost, with the Government’s aggressive marketing, the inaugural Singapore Formula One race next year and the eventual opening of two Integrated Resorts.

Figures from the Singapore Tourism Board released yesterday showed a record 766,000 visitors last month — a 7.1-per-cent increase over the same period last year. Hotels generated $152.2 million in revenue, a record 7.4-per-cent increase, while the average room rate was put at $201 — a rise of about 5 per cent.

With another 10- to 15-per-cent increase in room rates expected over the next six months, the hike in hotel property tax is not unexpected — especially since the last change to the computation formula was in 1986.

Hotels will continue to be taxed at 10 per cent of AV. Currently, the AV is based on 15 per cent of gross room receipts in the preceding year.

This will go up to 20 per cent next year and to 25 per cent in 2009. In addition, the AV of hotels’ food and beverage (F&B) areas will be based on estimated current market rent instead of 5 per cent of gross F&B receipts.

“Where Government is concerned, there is no free lunch,” said Mr Han. “It has been promoting tourism and one of the immediate spillover benefits would be in the hotel sector, so the tax criteria has to reflect current market sentiments.”

But there are grouses. Said an industry insider: “The IRAS has not been able to clarify the market rent in relation to F&B outlets. Many hotels manage the restaurants themselves and there are also function and meeting rooms which may not be used frequently.”

Mr Han, too, noted that market rent “differs from one property to another and factors such as location (even within the hotel) can affect the rates.” The issue is compounded if a hotel decides to have its function room at an adjacent shopping centre, for instance.

Source : Today – 24 Oct 2007

Understanding Singapore Property Tax: Obligations of a Property Owner

1. What is Property Tax? 

Property Tax is a tax on immovable properties (i.e. land and buildings). The tax payable is calculated based on a percentage (Tax Rate) of the Annual Value. 

2. Who is liable for Property Tax? 

All property owners are liable to pay Property Tax. 

 3. Definition of property owners 

Under the Property Tax Act, the person for the time being receiving rent of any premises whether on his account, as an agent/trustee/representative of the legal owner, or the person whose name is entered in the Valuation List, is deemed to be ‘owner’. Usually the ‘owner’ is also the legal owner. 

4. As an owner, is there anything I need to notify IRAS and what if I fail to notify?  

Yes, you should notify IRAS in writing within 15 days from the day:

• your property which has been vacant, is occupied;
• you no longer live in your property;
• you rent out property and charge premium;
• you increase the rent (including furniture rental and service charges) of your property;
• you erect, enlarge, alter, improve, rebuild or demolish your property / part of the building; and
• you apply to develop or subdivide your property. 

Please write to IRAS at 55 Newton Rd, Singapore 307987.  

Failure to give the required notice to IRAS is an offence which on conviction carries a fine not exceeding $5,000 plus 10% interest on the tax payable. The interest payable shall be calculated from the date of expiry of the period during which the notice is to be given. 

5. If I do not receive any notice to pay Property Tax, what should I do? 

If you own a property but have not received any notice from IRAS to pay the Property Tax on your property for more than a year, you have to notify the Chief Assessor.  

Please note that failure to inform IRAS without reasonable excuse is an offence and may be liable on conviction to a fine not exceeding $5,000. 

Source: IRAS

Singapore Property Stamp Duty

What is Stamp Duty?

Stamp Duty is a tax levied on documents which record transactions, such as disposition or transfer of interest from one party to another. Therefore, stamp duty is payable by the person who purchases both residential and non-residential properties in
Singapore.

How Much Stamp Duty?

Sales

Stamp Duty Payable = First S$180,000 of purchase price x 1% + Next S$180,000 of purchase price (if any) x 2% + Remaining of purchase price (if any) x 3%

Rentals

Stamp Duty Payable = Yearly rental / 250 x no. of years of lease (rounded up to the highest dollars) + $2 for duplicates.

When to Pay Stamp Duty?

For completed properties, the stamp duty is payable within 14 days after signing the Sale and Purchase Agreement if the document is signed in Singapore. If the document is signed outside Singapore, the stamp duty has to be paid within 30 days after the Sale and Purchase Agreement is received in Singapore.

For uncompleted properties, the Stamp Duty is payable within 14 days after the TOP (Temporary Occupation Permit) is issued or when you sell the property, whichever is earlier.