GST rises to 8% starting 1 January 2023. Should Tembusu Grand property buyers, sellers and upgraders be worried?
We have had at least 11 months to prepare for this announcement by the Singapore government. They announced the delayed implementation of our Goods and Services Tax hike (GST), during February 2022. It will be from 7% to 88% on January 2023 and 8% to 9 percent on January 2024.
Tembusu Grand developers units are designed to meet the quality of life and recreational needs of residents. A range of amenities are present in the facilities area that include swimming pool, gym, and outdoor playground to make it easy for residents to spend time with their loved ones.
Some property buyers, sellers and landlords will be wondering how the GST increase affects them. There are still about a half-month before the 1% rise.
Note that GST is not applicable if the service provider is GST-registered or a representative of a GST registered company.
If a business provider’s taxable turnover in the last year or next year exceeds S$1m, it must be GST-registered. You may be required to register GST under the Reverse Charge or Overseas Vendor Register regime. (See Importing overseas furniture and appliances below).
You can register to GST-register sole proprietors, partnerships, and smaller businesses voluntarily.
Are you concerned about how the GST increase (8% starting Jan 2023) will affect your business? Here’s a checklistServiced apartments, serviced apartments, shophouse residential components, vacant residential land, HDB flats and condos.
GST exempt (see furnished residential property below)Notice: A small home office (SoHo), located in an HDB condo or flat, will be considered residential. Also, you should verify the property’s authorized use under URA’s Grant of Written Permission. To be certain, you should also check the property’s approved use under URA’s Grant of Written Permission (eg. Master Plan).A shophouse, boarding, guest house, chalet, or holiday bungalow can have non-residential parts.Shophouse that can be used as a residential or non-residential shophouse (ie. commercial) componentMovable furniture and fittings are available.Wall-mounted air conditioners can be mounted on walls and are available in built-in cabinets, wardrobes or kitchen cabinets.GST is applicable to the supply of movable furniture or fittings.Notable: GST not claimed for immovable or permanent fixtures (like ventilation fans) that are purchased and installed on a leased property.GST is applicable to the purchase of new furniture and electrical appliances, as well as for contractors engaged in GST-registered renovations and related services.Services for brokers to buyers, sellers, landlords, and tenants of properties
GST is applicable to agent commissions, regardless of whether the property has a residential or nonresidential use.
If the rental deposit is fully refunded, GST-free; GST-chargeable for rent payable).If a landlord is paying maintenance fees on behalf of a tenant he will need to add GST to the amount he recovers from him.Agent fee to secure tenantGST (if the property is not a residential one): GST must be included in the rental amount. GST is exempt for residential properties.Monthly rental (GST-exempt for the bare residential units only) – The monthly rental value is 1/12 the annual property value. The monthly rental value for furniture and fittings is the difference between the monthly gross rent and the annual value. GST is exempt for furniture and fittings rentals that are less than 1/12th of the annual value.
Examples of Products or Services
|GST exempt or chargeable
Notes: Some scenarios may not be possible
Residential properties for sale and lease
Lease and sale of non-residential property
Leases and sales that include both residential and nonresidential
|GST is only applicable to the non-residential part|
Furnished residential properties
Real estate agencies
Monthly maintenance and service fees
|Water, electricity, Internet service provisionMonthly Condo maintenance fees, or HDB’s Service and Conservancy Fee (S&CC).||GST-chargeable (note: Budget 2022 will see HDB’s S&CC Rebates included under the permanent GST voucher (GSTV).|
|Monthly rental, deposit, maintenance fees, agent commissions and property tax|
Property Sales and Leases: Residential and Non-residential
GST is not applicable to the sale or lease of vacant residential land, buildings, flats, or tenements (referred as ‘buildings’).
Refer to URA’s Master Plan to determine if the property is suitable for residential use.
You can think of dwelling houses as residential properties. Bungalows, living or worker’s quarters, halls and residences are examples of residential properties.
Examples of non-residential properties include guest houses, chalets and canteens within residence halls. Also, the lower floors of shophouses that have been approved for non-residential uses.
You’ll likely have to pay more GST next year if you buy or sell commercial property.
Furnishings, fixtures, and fittings
The Inland Revenue Authority of Singapore, (IRAS) states that GST applies only to the supply of movable furniture and fittings. The IRAS recommends that GST-registered sellers must calculate the selling price for their furnished residential property into:
- The value of furniture and fittings is determined by open market value (or cost) and will be subject to GST.
- GST not applicable to the value of bare property
You will pay more GST if you sell or buy a resale or new property. You can expect to pay higher GST if you buy furniture, electrical appliances, and furnishings in the next year.
Companies that import low-value goods (e.g. Companies that import low-value goods (eg., furniture or electrical appliances) will need to include a GST reverse charge in their accounting books.
Import of electrical appliances and furniture from abroad
Many homeowners save money by purchasing imported furniture and appliances through online platforms like Taobao and Alibaba.
Many GST-registered Singapore-based middlemen (e.g. Online shopping platforms such as Shopee, Lazada, and Qoo10 that facilitate orders and services from overseas vendors will be subject to a higher GST rate starting January 2023.
Effective January 2020, GST will be charged to “imported services” business-to-business transactions via a reverse charge based on the accounting periods.
If a Singapore-based business engages the services of a customer support company that is not GST-registered from overseas, it may incur a reverse charge to “level the playing fields”.
This reverse charge was not applicable to imported goods, such as furniture or electrical appliances, for the past two-years.
Effective January 20, 2023, GST will be applicable to all imported low-value goods (LVG).
LVGs are generally non-dutiable goods that are less than the S$400 import relief threshold.
How can you renovate and furnish your home with cheap furniture imported from overseas? If the importer is subject to GST “reverse charges”, you might need to be ready for higher prices.
Currently, the reverse charge for imported services and LVGs applies to the following:
- GST-registered employees and companies that are not entitled to an entire input tax credit;
- GST-registered persons and companies that are part of a GST Group (eg. GST-registered personnel and companies that are part of a GST group (eg.
- Person who imports services or LVG exceeding S$1m within a 12-month period, but is not GST registered.
You might be wondering what a full input credit is.
Singapore companies (e.g. An importer of goods or services can claim tax as long as certain conditions are met.
If it is:
- Offers subsidised or free services
- Certain services and supplies are prohibited from being imported if they exceed S$40,000 per month. Additionally, 5% of all exempt and taxable supplies must be imported (the De Minimis rule).
These tax rules can sound complicated, but they are not. You can still read the IRAS explainer if you’re interested in learning more about which companies and types of employees will be subject to LVGs or reverse charges for import services.
Summary: Companies or personnel who import LVGs but are not eligible for a full input credit will need to account the reverse charges within their accounting periods.
These include local importers who sell you cheap furniture and electrical appliances on Taobao or Alibaba.
They may charge you a reversal fee.
If you are a GST-registered landlord who leases out a furnished residential unit to tenants, then the rental of the residential unit is GST-exempt.
You will need to add GST for the rental of furniture and fittings.
A GST-registered landlord, such as. If you have the annual property value, you can determine how much GST you will be charged to rent a furnished apartment from a GST-registered landlord (e.g.
IRAS’ guidance to landlords is that you need to first determine the annual property value to calculate the rental value.
The monthly rental value for a bare unit is one-third of its annual value. The monthly rental value for furniture and fittings is then the difference between the tenant’s gross monthly rent and the annual value.
GST is not required if the gross rent is less than 1/12th of the annual value.
Does that sound complicated? This is an example.
The total rent for the furnished flat is S$4,500 per month
Annual Value in the Valuation List = S$36,000
The monthly value of GST-exempted supply = 1/12 x S$36,000 = S$3,000
Monthly value of furniture and fittings supply = S$4,500-S$3,000 = S$1,500
GST Charge from Jan 2023 (per Month) = 8% x S$1,500 = S$120
The value of S$1,500 per month does not include the rental furniture or fittings that are stated in the tenancy agreement. This could make the monthly cost higher or lower.
If the gross rent is less than 1/12th of the AV, (eg. GST is not required if the gross rent is less than 1/12 of the AV (eg.
Agents and real estate agencies
Commissions received from GST-registered agencies for brokering Singapore-based properties are subject to GST, regardless of whether they are residential or nonresidential.
GST must be accounted for when:
- The commission has been received.
- A tax invoice is issued
If the property transaction is cancelled, the GST fee applies. However, the agent still has the right to receive the agreed commission (in full or in part) for services rendered. The provision of estate agency services is considered a separate taxable supply to the property’s sale or aborted sale.
Agents and salespersons GST-registered may be eligible for commissions from banks in order to refer clients to bank loans. As a taxable supply, they will have to account for GST on any commissions received.
GST is applicable to agent commissions for residential or non-residential properties if they are from GST-registered agencies.
Maintenance and monthly expenses
Your monthly expenses such as Internet and water services will also be affected by the increased GST due to your vendors next year.
You will likely see an increase in GST if you live in a condominium or strata-landed community.
The GST Voucher Scheme (GSTV), which includes HDB’s Service and Conservancy Fees, is permanent and homeowners shouldn’t be affected by GST increases in the future.
The GST will likely increase in the next year for monthly condo maintenance costs.
Landlords & Tenants
Finally, if your landlord is GST-registered, you will need to determine which part of your tenancy fees is GST-exempt.
If the rental deposit is refunded in full after the lease ends, it is GST-exempt. However, it can be charged GST if it is used to offset rent payable.
GST will be charged if you are paying maintenance fees for your tenant.
You cannot claim the agent commission you paid for the placement of a tenant if the rental is GST-exempt.
If your landlord is GST-registered, there will be a GST component to the rental of furniture and fittings.
You can’t claim GST from a tenant if you have paid property tax. GST is exempt for residential properties.
As stated earlier, if your residential unit is GST-exempt, then you can charge GST to rent furniture and fittings. This will be based on the difference in monthly gross rent and 1/12th of the property’s annual value. The rental of furniture or fittings is exempt from GST if the gross rent is less than 1/12th of your property’s annual value.
The above scenarios will help you make an informed decision about your property journey.
You need to know which financial component will be affected by the GST increase in next year’s GST, whether you are buying, selling, renovating, or leasing. You can avoid unpleasant surprises next year by knowing your tax invoices.
Are you looking to sell or list your house? Leave us feedback in the comment section below or send a request for a meeting with a property specialist.
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