Thursday, July 9, 2009

When To Tax Property Gains

Source : The Straits Times, July 8, 2009

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 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

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