Annual Value (AV) Of Property In Singapore
The Annual Value of a property helps determine the valuation of the real property in terms of finances. Every single property in Singapore is entitled to an Annual Value. So what is it essential to know about your AV? The gross AV of your real property helps homeowners determine the rent they can demand from potential renters and buyers. This valuation process is exclusive of the residential building’s facilities costs and maintenance fees.
The authority body that determines the AV of properties in Singapore is The Inland Revenue Authority of Singapore (IRAS). This regulatory body further states that the AV of a property is not determined by the exact income received by the house owner.
The IRAS annually updates its database to reflect any new market trends and always sends the property owners a Valuation Notice to notify them of any revisions that need to be done. They also do this to make sure that they update on any physical changes in the property, such as additional HDB blocks that will impact the AV of the domestic property exclusive of the maintenance fees.
What Are The Factors That Determine The AV Of A Property?
Rent received by the house owner
Although not a deciding factor, the annual rent received by the homeowner is an essential factor that determines the AV of any domestic property, excluding the facilities costs. The actual price that the landlord can charge will vary depending on different situations. For example, suppose the owner decides to cover the electricity and water bills. The rent will be calculated by considering the owner’s expenses for bearing such obligations and vice versa if the owner does not meet these obligations.
The municipal property assessor levies taxes on all taxable properties, which are determined by the municipal value of the real property. Typically, all municipal authorities charge homeowners municipal taxes annually based on the letting value, and the resulting amount is considered through various factors.
Standard rent is the type of rent already fixed by theRent Control Act (RCA). If the rent of the domestic property has already been set under the RCA, the owner does not have the right to expect a higher rent than the previously agreed upon amount. This unshakeable rent amount is an essential factor in understanding the Annual Value, whether for commercial or agricultural properties,
Fair rent refers to the rent amount that other similar private properties can ask for in the fair market from potential clients/buyers. The criterion is that it needs to be in the same area/locality since the market value of infrastructure costs relies heavily on location. Fair rent is easily determined through the percentage of market value prevalent in the current market.
How To Determine The AV Of Your Property?
You can check your domestic property’s AV through the IRAS website. You can use the view Property Portfolio e-Service link on the website at no extra charge to get a quote on your AV. If you want to get the Annual Valuation of other properties that you don’t own, you will have to pay a meager $2.50 for every property you look up.
What factors does the IRAS consider when determining the AV of a property?
- Similar properties for rent in the same locality
- The size of the property
- The condition of the property
- The location of the property
- Other physical attributes relevant to the AV of a property include amenities and shared facilities.
When should you calculate property AV?
Since the AV of a property is determined by the total calculated amount for which the property will probably be let out (for a reasonable price) from one year to the next, there are a few scenarios under which you need to calculate the AV of a property:
- property that is let out through the year
- property that is let out but vacant for a portion of the previous year
- property that is let out for an entire year
- properties that are let out partially
- properties that are self-occupied by the owner
- self-occupied property
- property that cannot be self-occupied because of overseas or other employment reasons
Benefits Of Knowing Your Property’s AV
The AV of your property will dictate how much tax you pay to your authority tax collector.
So, if you estimate how much your AV will be, you can make proper deductions that are standard and can be termed under “Income from house property” when filing your taxes.
There are also other uses for the annual valuation of properties, such as premium subsidies from the government like the GST voucher scheme, which allows low-income Singaporeans to get paid in cash every year.
If you are a Singaporean with an AV of $21,000 or more, you are not eligible to receive these vouchers.
Another such incentive is the SIRS (Self-Employed Person Income Relief Scheme), entirely used during the COVID-19 pandemic.
This scheme allowed all self-employed individuals to receive $3,000 three times as government aid. For this scheme, the property AV is used to determine who is eligible for the project with the maximum cap of $21,000.
How Does AV Affect Property Taxpayers?
As you might have already guessed, the annual evaluation of your property plays a huge role in determining your real property tax rate.
The valuation methodology that is followed to get the yearly property tax bill is:
AV of your property x Property tax rate = Total payable tax
How to calculate property tax?
There are two ways of calculating property taxes:
Residential property tax exclusion tax:
It includes residential properties that are taxed at 10%. The residential properties under this tax law include recreational clubs, welfare homes, child care centers, chalets, kindergartens, hotels, nursing homes, rehabilitation centers, serviced apartments, boarding schools, workers’ dormitories, staff quarters, or student care centers, and any other domestic property that is exempted from paying taxes under the Property Tax Act.
Non-owner-occupier Residential tax:
These can also be HDB flats, private buildings, or condominiums. The occupant of the building does not live in the building, so they are exempted from the cheap owner-occupier taxes.
If you are to avail of the 10% tax rate, you need to have the proper documentation that approves you for the above-mentioned residential properties. If you get the stamp of approval, you don’t have to apply to the IRAS.
How Does The AV Of Properties Affect Government Schemes?
Since the natural principle of any government scheme is to provide support to those in need of aid, AV of properties is typically used as a stand-in for premium subsidies from the government.
When a government scheme takes the AV of your property into account, your resulting valuation will depend on your residence as per your NRIC (National Registration Identity Card); whether you are living with your family or are occupying space as a tenant.
If you’re a tenant occupying a room in this place, you will be able to experience the full extent of government aid which includes renting an HDB flat or a room in landed property for this same price.
In Singapore, the average Annual Valuations of all HDB flats was $9,600, according to government statistics from 2020. However, the government is set to increase the value up to 6% for all HDB flats by 2022.
Will The AV Of Properties Increase In 2022?
With every passing year, the IRAS will continue its routine increase in the annual AV review of each property’s AV in 2022.
As for the rest of the properties, specifically HDB flat owners, there will be 4% to 6% increments in the value, which has been in effect since January 2022.
After this rapid rate implementation, all 1 to 2 room occupying tenants will not pay property taxes.
Additionally, 1 in every 3 three-room flat occupiers will be exempted from paying property taxes.
The increase in annual valuation of properties will result in 65% of 3-room flat occupiers paying up to $14 extra every year.
Likewise, homeowners of 4 and above rooms will pay up to $26 more in property tax.
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