Tenancy agreements are a crucial aspect of renting any property. They outline the terms and conditions of tenancy between the landlord and the tenant. While drafting a tenancy agreement, it is essential to consider the tax implications involved in the rental transaction. In this article, we will discuss tenancy agreement taxes and how to navigate them.

1. Income tax on rental income

Landlords are required to pay income tax on the rental income they receive from their tenants. The amount of tax payable depends on the rental income earned and the landlord`s tax bracket. Additionally, landlords can claim tax deductions on expenses incurred while renting the property, such as repairs and maintenance costs.

2. Goods and Services Tax (GST)

The Goods and Services Tax (GST) is a tax levied on the consumption of goods and services in Singapore. Landlords who own several properties and rent them out on long-term leases are required to register for GST. GST registration requires landlords to collect GST on rental income and file GST returns with the Inland Revenue Authority of Singapore (IRAS).

3. Property tax

Property tax is a tax levied on the value of the property and its land. Landlords are responsible for paying property tax on their rental properties. In Singapore, property tax is based on the Annual Value (AV) of the property. AV is calculated by multiplying the property`s market value with a predetermined percentage set by the IRAS.

4. Additional Buyer`s Stamp Duty (ABSD)

The Additional Buyer`s Stamp Duty (ABSD) is a tax levied on property purchases made by foreigners, permanent residents, and entities. If a landlord who is a foreigner or entity purchases a property to rent it out, they are required to pay ABSD. The tax rate for ABSD ranges from 5% to 15% depending on the purchaser`s nationality and the number of properties they own.

5. Rental Deposit

Rental deposits are common in Singapore and are payable by the tenant before moving into the rental property. The deposit is usually equivalent to one to two months` rent and is held by the landlord for the duration of the tenancy. While the landlord is not required to pay tax on the rental deposit, they are required to return it to the tenant at the end of the tenancy.

In conclusion, landlords and tenants must be aware of tenancy agreement taxes when entering into a rental transaction. It is crucial to understand the tax implications of renting a property to avoid any legal or financial issues. Landlords are advised to seek professional advice to ensure they comply with tax regulations and maximise their tax deductions.