How Property Tax is Computed
You can learn more in this article about how to compute property tax and provisional property tax and apply for paying less provisional tax.
How Property Tax is Computed
Property tax is computed at the standard rate on the net assessable value of the property for the relevant year of assessment. A year of assessment runs from 1 April to 31 March of the following year.
The net assessable value is computed as follows:
|[B] Less:||Irrecoverable Rent|
|[D] Less:||Rates paid by owner(s)|
|[F] Less:||Statutory allowance for repairs and outgoings (E x 20%)|
|Net Assessable Value (E-F)|
The following links provide you with more information on computing property tax.Tax rates of property taxMore information about rental incomeMore information about irrecoverable rentMore information about deductions against rental incomeMore information about statutory allowance for repairs & outgoings
How Much Property Tax Should be Paid
The following examples show how property tax are computed:
Example 1: How to compute the net assessable value (NAV) and the amount of tax
For the year of assessment 2015/16, rent was $10,000 per month and the tenant paid rates.
Assessment for 2015/16 (Final) and 2016/17 (Provisional)
|Assessable Value (AV)(rental for 12 months)||120,000|
|Less: 20% allowance for repairs and outgoings||24,000|
|Property tax for 2015/16 @15%||14,400|
|Add: Provisional property tax for 2016/17||14,400|
|(tax at standard rate of 15% on the NAV for 2015/16)|
|Total amount of tax payable||28,800|
- Due date for payment:
You will find a due date on the notice of assessment and you must make payment on or before the due date, unless on objection against the assessment or on the lodgment of a holdover claim, you have been notified by the Inland Revenue Department that you may pay a lesser amount of tax by the due date.
- Provisional property tax will be payable in two instalments:
On the notice of assessment, two due dates for tax payment can be found. Normally the first payment date will fall in November of the same year of the issue date and the second payment date will fall in April of the next year. This is because insofar as provisional tax is concerned, you will have received 7 months’ rent (i.e., rent for April to October) by the end of October and the full year’s rent by the end of March next year.
Example 2: Commence letting during the year
If the property was let on 1July 2015 for $30,000 per month and rates paid by the owner(s) were $12,000.
Property Tax for 2015/16 (Final)
|AV (rental for 9 months)||270,000|
|Less: rates paid by owner||12,000|
|Less: 20% allowance for repairs and outgoings||51,600|
|Property tax for 2015/16 @15%||30,960|
- Note: As the letting was commenced during the year, provisional property tax for 2016/17 will be based on the NAV for 2015/16, but grossed up to 12 months, as follows:
$ Estimated NAV for 12 months $(206,400 x 12/9) 275,200 Provisional property tax for 2016/17 @15% 41,280
- Notice of assessment for property tax
The property owner(s) will receive one single notice of assessment with the following details:
$ Property tax for 2015/16 30,960 Provisional property tax for 2016/17 41,280 Total amount of tax payable 72,240
- Calculation of the tax payable on the two payment dates:
2015/16 property tax + 7/12 of 2016/17 provisional tax $(30,960 + 41,280 x 7/12) $55,040
$ Balance of 2016/17 provisional tax $(41,280 x 5/12) 17,200 Total tax payable 72,240
How to Apply for Holdover of Provisional Tax
If one of the following conditions is applicable, you have to apply in writing not later than 28 days before the due date for payment of tax, or 14 days after the date of the notice for payment of provisional property tax, whichever is later.
- The assessable value for the provisional tax year was less than or likely to be less than
90% of the assessable value for the preceding year
90% of the estimated assessable value in respect of which you are liable to pay provisional tax.
In Example 1 above, the AV for 2015/16 is $120,000. If you wish to apply for holdover of part of the provisional tax, the estimated AV for 2016/17 must be less than $108,000.
- Your objection against the amount of NAV for the year of assessment 2015/16 is still in progress and the whole or part of the 2015/16 property tax has been stoodover.
- You have sold the property concerned in 2016/17 and your rental income is reduced during the provisional tax year.
- The amount of tax will be reduced because you have made an election for personal assessment.