Property tax raised twice in a year

Property tax raised twice in a year

 

IN SEPTEMBER last year, the Inland Revenue Authority of Singapore (Iras) revised the annual value of our property and barely half a year later, it has once again revalued it upwards.

 

Is it fair for the Government to increase property tax twice within a year, especially when many people are struggling to make ends meet in the face of rising cost of living?

 

The pain is all the more unbearable for people who are retired and living on their savings.

 

This latest upward revision of the annual value of our property is all the more incomprehensible when recent press reports revealed that some newly launched developments are seeing a slide in prices.

 

Tan Wenfa

 

Source: Straits Times

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Won’t pay TV licence? Expect a court summons

Won’t pay TV licence? Expect a court summons

 

By Chua Hian Hou

 

THE annual crackdown on people who have not paid their $110 TV licence is under way.

 

Several thousand home owners who have not paid up so far will get a court summons, and if they ignore this, they risk arrest and fines of up to $40,000.

 

There are no ifs or buts: All households with working TV sets must pay the licence fee.

 

Some 925,000 licences were issued as at Dec 31 last year.

 

But the Media Development Authority (MDA) estimated that about 100,000 households, or one in 10, do not pay the annual licence fee. The ratio has remained fairly constant over the years.

 

Some deliberately do not pay, while others complain about paying for content they do not watch.

 

However, most offenders let the payment slip because they either missed the notice or were financially strapped, said MDA customer and licensing services manager Regina Chang.

 

She said the fee ensures that ‘commercially less viable’ TV and radio programmes that ‘inform, educate and entertain our multicultural and multiracial society’ get made.

 

These include cultural shows as well as current affairs, drama, local sports and children’s programmes, and are broadcast on the six free-to-air TV channels and radio stations.

 

The MDA sends out notices to pay the TV licence together with the Inland Revenue Authority’s property tax assessment notice every December.

 

It sends a reminder to pay the original amount plus a $25 late payment fee to households that have not paid by Jan 31.

 

After this, and a second late notice, the agency sends a summons via registered mail to the ‘very small percentage’ that still do not pay up, said Ms Chang.

 

The summons has the desired effect, with ‘almost 80 per cent’ of the holdouts quickly paying up the $110 – plus a fine of up to $1,000 – to avoid going to court.

 

The few who ignore the summons can end up being arrested and going before a judge, said Ms Chang, although the agency only does this as a last resort.

 

Those found guilty face a maximum fine of $40,000 under the Broadcasting Act.

 

The Government has temporarily frozen the TV licence fee until the end of this year as part of a larger bundle of government fees that were left unchanged to help minimise the impact of inflation.

 

Besides Singapore, Japan, Germany, Britain and Switzerland also impose a TV licence fee.

 

Source: Straits Times

What to double-check when filing taxes

What to double-check when filing taxes

 

The deadline for individual income tax returns is just around the corner. Lorna Tan looks at common mistakes taxpayers make

 

THIS is the time of the year when taxpayers file their income tax returns – a mundane exercise for most. But for taxpayers who fail to report accurately, the penalty could be painful, involving fines or even a jail term.

 

As a result of the hot property market last year, two groups of taxpayers – Singaporeans who rent out their properties and real estate agents – can expect to be scrutinised closely this year.

 

Although every taxpayer is expected to file his returns responsibly, the Inland Revenue Authority of Singapore (Iras) is urging landlords and real estate agents to exercise extra care when filing this year.

 

Said Iras: ‘As the rental market had been active in 2007, Iras will put more emphasis on rental income declaration so as to ensure that taxpayers report their rental income correctly.’

 

Boosted by a buoyant economy and population growth, residential rents surged more than 40 per cent last year.

 

It is no wonder that Iras expects to step up checks on taxpayers who do not declare their full rental income or who make wrongful claims for expenses against their rental income.

 

Iras noted: ‘Our checks will include verification of gross rental and expenses and requests for supporting documents.’

 

Property agents can expect the same treatment from Iras, which will be checking and verifying the details of their income declarations.

 

This year, online tax returns must be completed by April 18; hard-copy forms must be posted to Iras by April 15.

 

According to Iras, there are several areas where individual taxpayers tend to make mistakes. These include the reporting of rental income as well as claims for parent relief or child relief.

 

For the self-employed, common mistakes include wrongful declaration of income and wrongful claims for expenses.

 

WHAT INDIVIDUALS SHOULD WATCH

 

Rental income, expense claims

 

FAILURE to report the gross rental income collected is a very common mistake. In most cases, taxpayers omit the income they get for furniture and fittings.

 

In a tenancy agreement, the gross rent is usually broken down into various components: rent for premises, rent for furniture and fittings, and service charges. When declaring rental income, taxpayers need to give the gross or total figure.

 

Other mistakes include reporting rental income based on estimates as well as incorrect expense claims. Taxpayers should note that expenses such as mortgage interest incurred on personal loans are not allowable. You can claim interest only on your mortgage loan.

 

Non-tax-deductible expenses include the cost of renovation, depreciation of furniture and fittings, and the legal costs incurred to secure the first tenant.

 

Deductible expenses are interest on your mortgage loan, property tax, fire insurance, commission paid to get a subsequent tenant, and expenses on repairs and maintenance.

 

Taxpayers should provide a working computation of how they arrived at the net rental income, with details of deductible expenses for each property.

 

In order to substantiate the income declared and expenses claimed, taxpayers should keep supporting documents such as tenancy agreements, mortgage interest statements, and invoices and receipts showing the expenses incurred.

 

·  Case study

 

Businessman Patrick Soon (not his real name) rented out a property, but did not declare the rental from the furniture and fittings. He thought he needed to declare only the rental for the premises.

 

He also claimed for personal medical and overseas travel expenses against his rental income.

 

After factoring in the rental for furniture and fittings and disallowing the private expenses, Iras found his additional taxable income came to about $100,000 a year. Additional tax and penalties were also imposed, according to Iras.

 

Parent relief

 

TAXPAYERS can claim this relief if they supported their parents, grandparents or great-grandparents in the previous year.

 

Common problems include duplicate claims and non-eligibility because of the dependant’s income level or age. Like many taxpayers, you might not be aware that this relief can be claimed only if the following conditions are met:

 

·  The dependant must have been 55 or above in the previous year;

 

·  His or her annual income (including dividends, interest and pensions) did not exceed $2,000 in the previous year;

 

·  He or she lived in Singapore in the previous year;

 

·  If he or she did not live in your household, you incurred $2,000 or more to support him or her; and

 

·  No one else is claiming this relief in respect of the dependant.

 

·  Case study

 

Ms Margaret Ang (not her real name) claimed the relief for both her parents, who had lived in her household for assessment years 2005 to 2007.

 

Iras found her father’s income had exceeded $2,000 in each of the years from 2004 to 2006. The relief in respect of her father had to be withdrawn; only that in respect of her mother was allowed.

 

Child relief for working mums

 

WORKING mothers who were married, divorced or widowed in the previous year can claim this relief. However, some do not realise they cannot do so if their children are not Singapore citizens.

 

·  Case study

 

Ms Selina Lee, a non-Singapore citizen, claimed the relief for her three children for assessment years 2005 to 2007.

 

The relief was withdrawn when Iras discovered that all three children are not Singapore citizens.

 

WHAT TO AVOID IF YOU ARE SELF-EMPLOYED

 

MISTAKES made by sole proprietors and those in partnerships include reporting of income under an incorrect category and wrongful claiming of expenses.

 

Many also keep incomplete records, for example, they don’t always hang on to receipts for public transport and entertainment expenses, which must be incurred for business purposes only.

 

·  Case study

 

Mr Robert Chan (not his real name) is a real estate agent who earns commission income. In his tax returns for assessment years 2005 and 2006, he claimed substantial deductions for transport expenses.

 

Subsequent checks by Iras revealed some of these expenses were incurred in respect of his private car, so the deductions were not allowed. However, the remaining claims were allowed after he was able to produce receipts to show that they were public transport expenses incurred in the course of his business.

 

Mr Chan had also claimed entertainment and gift expenses based on estimates. Without enough documents to substantiate the claims, those expenses that could not be fully substantiated were disallowed as deductions.

 

The additional taxable income totalled $126,000 for the two assessment years.

 

Source: Straits Times

S’pore is not a tax haven: George Yeo

S’pore is not a tax haven: George Yeo

 

It is a low-tax nation with no parallels to Liechtenstein

 

(SINGAPORE) Singapore said yesterday it is not a tax haven but a low-tax country and that there are no parallels between it and Liechtenstein, where rich Europeans have been dodging tax through secret bank accounts.

 

Singapore has strict bank secrecy laws and has been promoting itself as a rival financial centre to Hong Kong to manage money for rich local and foreign clients. This has prompted fears in Europe that it could become a refuge for money fleeing the continent.

 

‘Singapore is not a tax haven. We are a low-tax country but not a tax haven,’ Foreign Minister George Yeo told a joint news conference with his German counterpart Frank-Walter Steinmeier. ‘A situation which arose in Liechtenstein cannot happen here.’

 

Singapore is negotiating a free trade deal with the European Union but at the same time wants to avoid weakening its efforts to create a highly successful private banking centre, while European politicians have warned that Singapore’s refusal to soften bank secrecy could scupper the talks.

 

‘We’re an international financial centre so banking secrecy is very important. It is protected by law. But at the same time we do not condone drug money or terrorism money or money laundering – these are crimes,’ Mr Yeo said.

 

The comments come amid growing international pressure on Liechtenstein and other tax havens to lift the cloak of secrecy from banks as tax agencies across the globe widen probes into tax evasion involving accounts in the tiny European state.

 

Germany has been joined by a growing number of countries, including the United States, Britain and the Netherlands, in probing secret bank accounts used to hide money in Liechtenstein.

 

Germany‘s foreign minister, in Singapore for one day as part of an Asian tour, said yesterday that he has raised the subject of tax evasion with Singapore and that the issue had in the past led to heated debate in talks between the EU and Asean.

 

‘I’m not surprised that this topic is being watched here with the highest sensitivity,’ he said. — Reuters

 

Source: Business Times

ST Forum: HDB property tax should be cut, not increased

HDB property tax should be cut, not increased

 

I AGREE completely with Mr Ridzwan Abdullah, ‘Wrong time to raise property tax on HDB flats’ (ST, Dec 28).

 

It completes a trend of unreasonable price increases in Singapore. When you add up all the increases in 2007 – bus fares, taxi fares, GST, income tax, tax on utility bills, school bus fare hikes, bread prices and all the trigger effect – this property tax increase is insensitive.

 

HDB flats comprise basic housing for the people. That the property tax for private properties was raised is a lame excuse for the Government to do so for HDB flats.

 

In fact, judging from the problems we have in HDB estates that the authorities had not tackled satisfactorily – increased noise level, increased fire hazards, dengue problem, dumping of rubbish in corridors – there should be a decrease in property tax.

 

For the 35 per cent of us who pay income tax, there should be more rebates to cope with the increase cost of living.

 

Yum Shoen Liang

Source: Straits Times

Ruling on rental income cheers serviced apartment operators

But IRAS files appeal with High Court against tax review board’s ruling

 

By VEN SREENIVASAN

 

(SINGAPORE) In a landmark decision, the Income Tax Board of Review has ruled that a serviced apartment operator’s rental income should be treated as normal recurrent business income, and not as income from property investments.

 

This means that serviced apartment operators can claim deductions on expenses and capital allowances beyond the actual income for the year.

 

The Dec 14 ruling came after the company, believed to be part of the Frasers Centrepoint group, appealed against an earlier ruling of the Inland Revenue Authority of Singapore (IRAS). The latest ruling will have significant implications for not just serviced apartment operators, but also for the operators of the future integrated resorts.

 

Earlier, IRAS had contended that serviced apartment owners and operators were merely in a business of letting property, and in a ‘business of making investment’ under Section 10E of the Income Tax Act.

 

Section 10E says that a business which makes investments, including the ‘letting of immovable property’, cannot claim deductions on expenses and capital allowances beyond the actual income for the year.

 

The tax implication is that any losses sustained for one year will not be allowed to be carried into the following year, as is the case for an ordinary trade or business where losses are generally allowed to be carried forward.

 

The Board rejected IRAS’ contention that the serviced apartments and the retail mall businesses are businesses of making investments under Section 10E.

 

Unlike serviced apartment, hotels in Singapore are allowed to carry forward losses.

 

Industry insiders say the ‘Section 10E’ treatment has troubled the industry for a long time.

 

As the range and sophistication of services have increased over the years with top-end serviced apartments offering a myriad of products and services, this unequal treatment has become increasingly untenable, they say.

 

Not surprisingly, many see this as a test case for the industry.

 

The Board of Review’s decision will also no doubt be welcomed by serviced apartment operators, who argue that it is the correct approach in looking at serviced apartments as a ‘multi-factorial’ one.

 

The appellants’ counsel, tax lawyer Ong Sim Ho, successfully argued that whether a business was one of making investment had to be determined in the light of all the surrounding facts, including evidence of the intention of the enterprise in embarking on the venture.

 

He said that where the letting of property was a mere but necessary platform from which business operations are carried out, Section 10E should not be applicable if those business operations constituted the real business of the taxpayer. He urged the Board to consider the wide range of hospitality services provided to the apartment guests.

 

The Board agreed that the serviced apartment- cum-shopping mall business should be looked at as an integrated whole.

 

The decision is likely to cause a re-examination of the approach to taxation of serviced apartments generally.

 

The IRAS has filed an appeal against the decision to the High Court.

Source: Business Times