SINGAPORE Law and Practice Contributed by: Benjamin Tay, Chou Ching, Norman Ho, Vikna Rajah, Chun Kiat and Marcus Tay, Rajah & Tann Asia
now the default for institutional transactions involving non-residential assets. Intra-group restructurings may attract relief under Section 15 of the Stamp Duties Act, subject to the conditions described in 2.10 Taxes Applicable to a Transaction . The use of Singapore-domiciled hold - ing structures may also facilitate access to reduced withholding tax rates on distributions to investors, depending on the investor’s jurisdiction and the appli - cable double taxation agreements. GST optimisation – including structuring a sale as a TOGC where pos - sible – is another area where early planning can yield material savings. 8.3 Municipal Taxes Singapore levies property tax as a national (rather than municipal) tax on the annual value of all proper - ties. There are no additional municipal rates or local authority taxes applicable to commercial occupiers in Singapore. Property tax rates for owner-occupied non-residential properties and non-owner-occupied non-residential properties differ, with non-owner- occupied properties subject to a flat rate on annual value. 8.4 Income Tax Withholding for Foreign Investors Singapore taxes income on a territorial basis – only income arising in or derived from Singapore is gener - ally subject to Singapore income tax. Foreign inves - tors receiving rental income from Singapore property are subject to income tax in Singapore at the pre - vailing corporate rate (17% for companies) or at the applicable individual income tax rates, with obliga - tions on the Singapore payer to withhold tax at source in certain circumstances. Gains from the disposal of Singapore real estate are not generally subject to capital gains tax in Singa - pore, as Singapore does not have a capital gains tax regime. However, gains that are characterised as income: for example, where the IRAS determines that the seller is carrying on a trade in property, are subject to income tax at the prevailing corporate rate tax of 17%. The characterisation of property disposal gains as income or capital is a facts-and-circumstances analysis in which the Inland Revenue Authority of Sin -
gapore (IRAS) applies criteria broadly analogous to the badges of trade – relevant factors include: • the frequency and number of similar transactions; • the length of the holding period; • the nature of the taxpayer’s business; • the source and purpose of acquisition funding; • whether the property was acquired with a resale intention; and • the circumstances that prompted disposal. Investors who acquire and dispose of multiple proper - ties over a compressed holding period – even through Singapore-incorporated vehicles – should obtain a considered view on the income-versus-capital char - acterisation before disposal, as a successful challenge by the IRAS can result in a material and unexpected tax liability on the full gain. Distributions from Singapore REITs may be subject to withholding tax depending on the investor category; concessionary rates have been provided for qualifying non-resident non-individual investors. 8.5 Tax Benefits Singapore does not allow depreciation deductions on the capital cost of real estate for income tax pur - poses in the same way as some other jurisdictions. However, certain capital allowances are available on qualifying plants and machinery used in the produc - tion of income. Industrial building allowances may be available for qualifying industrial buildings, subject to the conditions under the Income Tax Act. For qualifying funds holding real estate – including VCCs and limited partnerships managed by Monetary Authority of Singapore (MAS)-licensed managers – the Section 13O and Section 13U tax incentives provide exemption from Singapore income tax on specified income, including rental income and gains from the disposal of qualifying investments. These incentives are subject to conditions relating to minimum assets under management, local business spending and the employment of investment professionals in Singapore, and represent a significant tax benefit for institutional fund structures.
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