Despite the various cooling measures implemented by the government in recent years, Singapore’s commercial real estate sector continues to thrive. These measures primarily focused on curbing residential property prices, thereby having minimal impact on the commercial market.
Considering the attractiveness of buying commercial property in Singapore, prospective purchasers have two feasible choices. They can either buy the property in their personal name or register a private limited company for the purpose of acquiring the commercial real estate. It is highly advisable to consider the latter option, and in the subsequent sections, we explain the advantages using private limited company for commercial property investment.
Advantages of Registering a Company before Buying Commercial Property in Singapore
Goods & Services Tax (GST) consideration
While GST exemption applies to residential property transactions, commercial real estate transactions are subject to GST. Company purchase a commercial property can opt for GST registration to claim back the GST amount paid, provided they meet GST Comptroller requirements.
Ownership of Commercial Property and Stamp Duty
Non-residential property in Singapore, including commercial property, can be purchased and owned by Singaporean citizens, permanent residents, and foreigners without having to pay additional buyer stamp duty (ABSD), which is applicable to residential properties.
From 15 February 2023, BSD tax is 5% for non-residential properties since the last rate revision on 20 February 2018. Although no Additional Buyer Stamp Duty (ABSD) applies to commercial properties, industrial properties are subject to Seller’s Stamp Duty (SSD) within specific timeframes.
Commercial / Industrial property acquired on and after 12 Jan 2013 and the SSD rate compute based on the length of holding its property
|Date of acquisition
|SSD rate (on the actual price or market value, whichever is higher)
|On or after 12 Jan 2013
|Up to 1 year
|More than 1 year and up to 2 years
|More than 2 years and up to 3 years
|More than 3 years
|No SSD payable
Advantageous Lower Corporate Tax Rates
Corporate tax rates, 17% in Singapore are generally lower than personal tax rates particularly for individuals in higher income brackets (up to 24%). Consequently, opting to hold commercial property under a corporate entity is often a more favorable choice.
Tax planning opportunities
A private limited company allows for more flexibility in tax planning compared to individual ownership. You can potentially lower your tax liability by taking advantage of various tax deductions (e.g., tax exemption up to S$200k) and incentives available to companies.
Capital Gains Tax in Singapore
Typically, gains from property sales in Singapore remain exempt from taxation, as they are classified as capital gains, and Singapore does not impose capital gains tax. However, this rule has an exception when one considered engaged in property trading.
Registering a company establishes a separate legal entity, shielding owners from personal liability for any debts or legal issues that may arise from property ownership. This meant that your personal assets remain safeguarded, even in the face of unforeseen challenges.
Passive income avenues
Setting up a private limited company for your commercial property investment allows you to generate passive income. You can rent out the property to tenants and receive regular rental income, which can be a lucrative source of income.
Ease of Transferring Property Ownership
Transferring ownership of a commercial property can be a complex and time-consuming process. However, if the property is owned by a private limited company, ownership can be easily transferred by simply transferring the shares of the company.
A registered company portrays a more professional image to potential clients, partners, and stakeholders. It signifies a serious commitment to the business endeavor and showcases a strategic approach towards growth and development. This credibility attracts high-value clients and investors, instilling confidence in engaging with a proper registered company.
Seamless Business Operations
Having a registered entity in place allows entrepreneurs to streamline administrative and operational functions, ensuring smooth operations from the beginning. This includes establishing banking relationships, securing financing, and managing rental agreements. This integrated approach saves time and effort, allowing individuals to focus on core business aspects and drive growth and expansion.
In conclusion, registering a private limited company before buying commercial real estate in Singapore offers numerous advantages such as tax benefits, limited liability protection, ease of ownership transfer, and opportunities for passive income. It is a prudent choice for individuals planning to invest in the thriving commercial property market of Singapore.