There is a proposed change to income tax laws to tax property sellers when they profit from the sale. The law is targeted at speculators as it allows a person to sell one property without tax in any four year period. So if you sell another property within 4 years of your last sale you can be taxed.
If you read the article carefully, the law is supposed to provide certainty in our tax laws. Under the current law, the tax man can come after you if he decides that you're a property trader. However, the law is ambiguous on what constitutes 'trading'. I've never heard of any individual being taxed for property trading. However, with the amendments - the certainty is the taxman now can come after you if you sell 2 properties within 4 years.
This proposed law caused property stocks to tumble today on the stock exchange.
The proposed law looks like it is aimed a property speculators. However, not everyone who sells 2 properties within 4 years is a speculator. For example, if you sold your property and upgraded to a private property that gets en bloc, you are forced to sell your property. Or you might want to upgrade your home within 4 years because you found a better place. People change the place they work often these days and they might shift to a better location within 4 years.
One way to fix this law is to make it non-applicable to own occupied properties. If I buy a place to stay, and then shift twice in 4 years but each time I own only one property which I occupy, it is unlikely for me to be a trader.
Making the law clearer doesn't make the law better.
When to tax property gains 10 min
By Goh Eng Yeow, Senior Correspondent
A PROPOSED change to income tax laws will make clearer to property sellers when they will be taxed on their profits.
Anyone who sells only one property in any four-year period will not be taxed on his profit, according to a proposed amendment to the Income Tax Act.
But if he sells another property within four years of the first sale, the profit from the second sale may be taxable.
If the proposal becomes law, it will provide certainty for owners who now cannot be sure if the taxman will come calling after they sell.
Under existing rules, an individual does not pay tax on gains made from selling a property unless the taxman decides that he is trader - someone who buys and sells multiple properties within a short time span. And there is no way for the seller to know in advance if he might be deemed a trader.
The new way of taxing property profits is one of many changes listed in a draft Income Tax (Amendment) Bill 2009 put up for public feedback last month by the Finance Ministry. If implemented, the change will take effect from January.
A ministry spokesman told The Straits Times on Tuesday that the proposed change aims to provide certainty of non-taxation to individuals who own property.
Once it takes effect, the individual who sells a property for a profit can be sure that his gains will not be taxed - provided he had not sold any other property in the previous four years.
If he sold other properties within that period, the spokesman said, the Inland Revenue Authority of Singapore (Iras) will decide whether he should be taxed, 'based on the facts and circumstances, no different from the present tax treatment'.
The draft Bill can be read at the Finance Ministry website www.mof.gov.sg and the public has up to next Tuesday to give feedback. The Bill is expected to go before Parliament later in the year.
Read the full story in Wednesday's edition of The Straits Times