Rental Stamp Duty

Stamp duty is a government tax charged on any document regarding the lease or purchase of immovable property or stock market shares. It’s essentially a service charge paid to the Inland Revenue Authority of Singapore (IRAS). 

Paying the stamp duty is mandatory, just like paying an apartment’s security deposit and monthly rent. Doing so validates the legality of the document in the eyes of the law. 

Who is supposed to pay the stamp duty? Well, technically, that depends on what the agreement says. As a tenant, you could convince the owner to pay the stamp duty instead. If that’s the case, be sure to have it mentioned in the agreement. 

Unofficially, the payment of the stamp duty falls under the tenant’s responsibility. You might think it’s an extra burden to bear, but it does bring a lot of goodwill into the agreement. 

Stamp duty in Singapore usually applies to lease or tenancy agreements regarding a property. This includes mortgages and transfer documents for properties such as land or apartments. 

It is also applicable to documents regarding share transfers, share mortgages and property holding entities.

The stamp duty is paid to provide validity to the rental document in the eyes of the law. It is what officially makes the agreement valid. This leads to the question, is paying the stamp duty even worth it? Yes, it absolutely is. 

Let’s say you decided to save a few extra dollars and simply avoid paying the stamp duty. If that’s the case, then there is no legal right which can prevent the owner from suddenly kicking you out, should he choose to do so.

What’s more, failure to pay the stamp duty is considered a form of tax evasion, which could lead to expensive fines if probed by the IRAS. So if that’s the path you want to take, good luck to you; you’ll need it.

In other words, It is just common sense to pay the stamp duty to avoid any issues in the future. You could obviously take your chances without paying, but we don’t think you want the mental stress. As your favorite criminal lawyer Saul Goodman would say, ‘the wicked flee when no man pursueth’.

Stamp duty should be paid whenever the annual rental price is more than 1000 $, which makes it quite a common ordeal. 

There are two methods to calculate the stamp duty for leases. The first method applies to cases where the property lease period is below 4 years. Here, the payment is 0.4 % of the market rent for the particular lease period.

For example, if the rent is 1000 $ per month for a 2-year lease, the stamp duty payable amount will be 96 $. 

The formula will be

0.4 % X 1000 $ X 24 months = 96 $

Where’s for lease periods that exceed 4 years, the payment is 0.4 % of four times the total average annual rent. 

For example, let’s set the rent at 1000 $ per month for a 5 year lease period and an average annual rent of 12000 $. 

The formula to calculate the payable stamp duty will be

0.4 % X 5 X 12000 = 240 $

If you don’t like doing the math, simply use the Rental stamp duty calculator on the official IRAS website. You can type in the figures and instantly get the correct answer, making stamp duty calculations as smooth as butter.

There is absolutely no room for errors when it comes to stamp duty payment, so make sure you’re on top of the game. For example, people usually think that the stamp duty payment is unnecessary for apartment rental documents. This is a mistake and can result in severe consequences. 

Note that stamp duty charges apply to any document regarding rental, leasing, sale, or property transfer. However, it also applies to cases of inheritances and personal gifts. In that situation, the stamp duty amount should be calculated on the property’s current market value. 

The most convenient way to pay the stamp duty is to do it online through the IRAS e-stamping portal. Make sure to collect your stamp certificate after making the payment. 

If you’d rather do it in person, then you can visit any of the four service bureaus located in Singapore.

Generally, stamp duty is only exempt when the average annualized rent is less than 1000 $. Additionally, it can also be exempt for foreign embassies if the correct procedure is followed.

If you fail to follow the given timeframe, you are liable for a late payment penalty.

For late payment of 3 months or less, you will either be fined 10 $, or an amount equal to the payable stamp duty. They usually pick whatever is higher. 

For late payments of more than 3 months, you will be fined either 25 $, or four times the payable stamp duty. As usual, they will pick whatever is higher.

Some of the recent changes include an additional buyer’s stamp duty for certain types of residential property buyers. Also, a Seller’s stamp duty has been adopted for both industrial and residential buyers. These are generally those who buy properties during advantageous dates and sell them off after a predefined timeframe of fewer than three years. 

According to the Singapore stamp duties act, an exemption is valid for any document regarding property located outside of Singapore. This also includes official government documents and any documents related to foreign company shares.