Taxable Rental Income
As per the guidelines provided by the Inland Revenue Authority of Singapore (IRAS), any payments received as rent from the rental of your property are subject to rental income tax in Singapore. They must be declared in your income tax return.
When you rent out your properties and receive monthly payments, rental income tax in Singapore is accrued. Although renting out secondary properties is not considered a job or form of employment, it is still regarded as a source of income. Thus, requiring you to pay rental income tax on the rent you earn.
The term “rental income” encompasses the entire amount of rent and associated payments received from leasing your property. This includes rent for the premises, maintenance, furniture, and fittings. The taxable income is determined as the net amount of total rental income after deducting allowable expenses.
Owners or joint owners of a property are collectively taxed on the rental income based on their legal share in the property.
If you plan to rent out your property, it is essential to inform the IRAS within 15 working days and pay the necessary stamp duty. Utilizing the IRAS digital platform to process the tenant agreement (TA) will automatically inform the IRAS. This saves you the effort of doing so separately. Non-compliance with these requirements may result in a fine of up to $5,000, plus interest on the tax payable.
Before deciding to rent out your property, it is crucial to understand how to calculate rental income tax. You need to make the required payments, and be aware of what expenses are tax deductible.
Formula for Taxable Net Rental Income
- The interest incurred on the housing loan or mortgage used to acquire the rental property (proportionately allocated if it’s also utilized for personal purposes).
- Property tax payments.
- Expenses related to fire insurance coverage.
- Expenditures for repairs and maintenance.
- Costs associated with securing a tenant.
- Fees for supervision or property management.
Rental Income Tax Calculator and Simplified 15% Claims Deduction
As discussed, when calculating rental income tax in Singapore, you deduct your deemed expenses from your gross rental income.
To simplify the process and avoid the need to calculate deemed expenses each time you fill out your rental income tax form, the IRAS offers a beneficial option. Landlords can apply for a simplification of claims deduction. This allows them to deduct a flat 15% of their gross rental income instead of the exact rental income tax amount.
This is particularly advantageous for busy landlords who find it challenging to calculate their precise rental income tax. It also works for those whose deemed expenses. These include mortgage and maintenance fees) are lower than 15% of their gross rental income. In such cases, they benefit from the difference between 15% of their gross rental income and the actual deemed expenses they incur.