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Singapore: Guidance on Taxation of Property Developers Issued

(Mar. 11, 2013) On March 6, 2013, the Inland Revenue Authority of Singapore (IRAS) released information on the taxation of property developers; the information was in the form of an e-Tax Guide. (IRAS E-TAX GUIDE: INCOME TAX: TAXATION OF PROPERTY DEVELOPERS, IRAS website (Mar. 6, 2013); Daljit Kaur, Singapore: Taxation of Property Developers – Details, IBFD TAX RESEARCH PLATFORM (Mar. 7, 2013), online subscription database.)

The Guide applies to companies, partnerships, or individuals carrying out property development, which is defined as “the development of land parcels into residential, commercial and industrial properties for sale, usually prior to the completion of the properties.” (IRAS E-TAX GUIDE, supra, § 1.2.)

Among the points in the Guide are:

  • the date of acquisition of a property for development for sale is considered the beginning date of a property development business;
  • profits from a development project are taxable from the date a temporary occupation permit is issued for the property;
  • for tax purposes, the profit of a development project is calculated based on the proceeds from sales of units within the property less the costs of development incurred up to the date of sale;
  • businesses can either pay taxes upfront on income from the property that they gain before or during the development process or offset it with the costs of development;
  • any expenses related to the acquisition of land or to property development can be capitalized and kept in a development cost account until the tax year in which a temporary occupancy permit is issued;
  • no deductions can be taken for diminution in property value due to unsold units or costs incurred from warranty liability;
  • when a property is developed with a plan of selling part of the development and holding the rest as an investment, expenditures related to the development should be apportioned based on actual costs incurred;
  • when undeveloped or partially developed land is sold, income from that sale is taxable, as is rental income from any sub-units;
  • discounts on sales of properties offered to employees of the business doing the development are considered benefits-in-kind and are taxable. (Id.; Kaur, supra.)