IMPLICATIONS OF TAX LEGISLATION ON REAL ESTATE INVESTMENTS IN SINGAPORE

Abstract

Tax legislation has serious implications on corporate real estate investments due to its growing complexity. Investment policies must be adjusted whenever new taxes are introduced or changes are made to existing legislation to reduce the tax impact so as to give the most advantageous net-of-tax position. This study reviews the impact of current tax legislation on real estate investments in Singapore and examines the effectiveness of tax incentives introduced and their accounting treatments. A survey on companies was conducted to evaluate the tax effect on corporate real estate investments. It was found that depreciation allowed for building and structure, property tax, deductibility of expenses, capital gains tax and capital allowance were considered the most significant. An actual case is used to analyse the decision making process taken and tax considerations involved in real estate investment. Some tax minimisation techniques within the current legal framework are suggested to reduce the tax burden on real property investments. However, given the complex tax structure in Singapore, independent legal advice would still have to be sought prior to the implementation of the proposed schemes since they might be rendered null and void by the tax authorities within the jurisdictions of the anti-avoidance provisions.