Etaxguide_GST_GST Incurred On Purchase Of Land For Residential Development 2nd Edtn GST Guide (2nd Edn)

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GST Guide on Purchase of Land for

Residential Development

(Second Edition)

IRAS e-Tax Guide

Published by

Inland Revenue Authority of Singapore

Published on 1 Jan 2018

First edition 31 Mar 2014

Disclaimers: IRAS shall not be responsible or held accountable in any way

for any damage, loss or expense whatsoever, arising directly or indirectly

from any inaccuracy or incompleteness in the Contents of this e-Tax Guide,

or errors or omissions in the transmission of the Contents. IRAS shall not be

responsible or held accountable in any way for any decision made or action

taken by you or any third party in reliance upon the Contents in this e-Tax

Guide. This information aims to provide a better general understanding of

taxpayers’ tax obligations and is not intended to comprehensively address all

possible tax issues that may arise. While every effort has been made to

ensure that this information is consistent with existing law and practice,

should there be any changes, IRAS reserves the right to vary our position

accordingly.

© Inland Revenue Authority of Singapore.

All rights reserved. No part of this publication may be

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Table of contents

Page

1 Aim ..................................................................................................................... 1

2 At a glance ......................................................................................................... 1

3 Exceptional Relief Under Regulation 41 for taxable persons ........................ 3

4 Remission under Section 89(1) for non-taxable persons .............................. 4

5 Claiming of GST under Regulation 41 & Application for Remission ............ 4

6 Contact Information .......................................................................................... 6

7 Updates and amendments ................................................................................ 7

GST Guide on Purchase of Land for Residential Development

1

1 Aim

1.1 This e-tax guide clarifies1:

(a) the application of regulation 41 of the GST (General) Regulations to a

taxable person; and

(b) the circumstances under which the Comptroller may consider to allow

the same relief to a non-taxable person via remission under section

89(1) of the GST Act.

2 At a glance

2.1 Paragraph 2 of Part 1 of the Fourth Schedule to the GST Act exempts the

sale and lease of residential properties. Residential properties refer to:

(a) any vacant land zoned ‘Residential’ in the Master Plan under the

Planning Act (Cap.232) and used or to be used for residential purposes

or for the purposes of condominium development;

(b) any land where the supply is made by the Government or such public

authority as may be approved by the Minister or such other person as

the Minister may appoint, and the land –

(i) is approved exclusively for residential or condominium

development; and

(ii) is vacant or has any building on it that is required by the

Government or the public authority to be demolished;

(c) any land or part of any land with any building on the land or part, being

a building which is used or to be used principally for residential

purposes, but not if –

(i) the land or part is supplied by the Government or such public

authority as may be approved by the Minister or such other person

as the Minister may appoint;

(ii) the building on the land or part is required by the Government or

the public authority to be demolished; and

(iii) the land or part (with the building demolished) is not approved

exclusively for residential or condominium development.

2.2 The sale and lease of all other properties aside from those specified under

paragraph 2.1 above will be subject to GST when supplied by a GST

registered person.

1 This e-Tax guide replaces the IRAS’ e-Tax guide on “GST Incurred on Purchase of Land for

Residential Development (Fifth Edition)” published on 19 Oct 2012.

2

2.3 A developer may claim the GST incurred on the purchase of land if he intends

to develop2 the land for non-residential use to generate taxable supplies. If he

intends to develop the land wholly or partially for residential use to make

exempt supplies, GST incurred on that part of the land is not claimable.

2 In the context of this GST e-tax guide, “develop” refers to the constructing of any building in, on,

over or under land, or making material change in the use of the land.

3

3 Exceptional Relief Under Regulation 41 for taxable persons

3.1 To relieve GST-registered developers from the GST paid on land purchased

for residential development (whether wholly or partially), the Comptroller can

allow the GST incurred to be attributable to the making of taxable supplies.

This is provided for under regulation 41(1) of the GST (General) Regulations.

3.2 The relief under regulation 41(1) is only applicable for the GST incurred on the

purchase of the following types of land for residential development:

(a) vacant land, or

(b) land with buildings that will be demolished.

3.3 This is regardless of the zoning of the land at the point of purchase, or

whether there will be any subsequent rezoning of the land.

Land for both residential and non-residential development

3.4 If a land3 is to be used for both residential and non-residential development,

the relief under regulation 41 is limited to the portion of GST incurred for that

part of the land to be used for residential development. As such, for mixed

development, a taxable person needs to identify the amount of GST incurred

for residential development before obtaining the claim. This value should be

supported by an independent valuation of the cost attributable to that part of

the land for such development.

3.5 The GST incurred for that part of the land to be used for non-residential

development is claimable if the conditions under section 19 and 20 of the GST

Act are satisfied.

Land with buildings

3.6 In the case of a land supplied with building(s) for which the building(s) will not

be demolished, regulation 41(2) continues to provide relief for only the GST

incurred on the cost of the land (and not the building(s)) for residential

development.

3.7 In instances where the land was purchased with building(s) which was put to

use4 prior to demolition, or that the building(s) will be retained for residential

use, the developer is required to obtain an independent valuation5 indicating

separately the value of the land and that of the building(s). GST for the cost

incurred on the building will not be claimable under regulation 41.

3 This includes vacant land and land with building(s), whether or not it is to be demolished.

4 “Use” includes all temporary approvals to use the buildings, temporary leases, fulfilment of existing

leases, etc.

5 The valuation will be subject to the Comptroller’s review. The Comptroller reserves the right to use

any appropriate and reasonable proxy to determine the value of the building(s).

4

4 Remission under Section 89(1) for non-taxable persons6

4.1 Developers who are not GST-registered may purchase land for the same

purpose of developing residential properties (whether wholly or partially).

The relief under regulation 41 of the GST (General) Regulations does not

apply to these developers, as they are non-taxable persons.

4.2 A non GST-registered developer who satisfies the conditions of regulation 41

(other than the fact that he is not a taxable person) can make an application to

the Comptroller of GST for remission under section 89(1) of the GST Act for

the GST incurred.

4.3 The Comptroller will only consider remitting the portion of GST incurred on

that part of the land to be used for residential development. Similar to a GST-

registered developer undertaking a mixed development, the non GST-

registered developer will need to identify the GST incurred on that part of the

land to be used for residential development and maintain relevant documents

to support the remission.

4.4 The remission is also confined to land, and not any building on it. Any existing

building on the land that is to be demolished has to be demolished before a

remission will be considered.

4.5 If a land is purchased prior to a developer’s GST registration, the claim for

GST for the land (or part of the land) to be used for residential development

shall be treated as an application for remission as he was not a taxable

person at the point of purchase.

4.6 Each application for remission under Section 89(1) of the GST Act will be

considered based on its own merits and the Comptroller’s decision is final.

The Comptroller may set conditions when granting a remission. If the

developer fails to comply with the conditions for the remission, he is required

to repay the tax remitted to him previously within 1 month after the service of

a notice by the Comptroller.

5 Claiming of GST under Regulation 41 & Application for Remission

5.1 Both the GST-registered developer who is claiming the relief under regulation

41, as well as a non GST-registered developer who is seeking remission

under section 89(1), must satisfy the following criteria:

(a) He is the legal owner / lessee of the land;

(b) He is the developer of the residential properties;

(c) He has paid the purchase price and GST charged on the land;

6 A non-taxable person is one who is not liable for GST registration under the First Schedule to the

GST Act.

5

(d) He has obtained the Written Permission (WP) from URA to develop

wholly residential development or mixed (residential and non-

residential) development;

(e) He has obtained a Valuation Report7 to identify the cost attributable to

that part of the land for residential development in the case of mixed

development;

(f) His claim of GST under regulation 41 or remission under section 89(1)

is made within 5 years from the date of purchase of the land (with

effect from 1 Jan 2007); and

(g) He maintains the following documents to support purchase of land,

payment of GST and proposed development:

(i) Tender document, building agreement and sales and purchase

agreement (whichever is applicable);

(ii) Valuation report in the case of mixed development;

(iii) Relevant tax invoice(s);

(iv) Payment evidence of the purchase price including GST;

(v) Written Permission from URA on the proposed development and

the relevant documents; and

(vi) Documents from the relevant authorities, proving that any existing

building on the land has been demolished (if the building is not to

be retained).

Claiming of GST under Regulation 41

5.2 A GST-registered developer can obtain the relief under regulation 41 through

his GST return(s) without seeking approval from the Comptroller. He should

do so only if he satisfies all the conditions listed under paragraph 5.1 above.

5.3 In the event that the GST-registered developer is found to be ineligible for the

claim, the GST-registered developer would need to repay the GST. Any

wrong claim is subject to late payment penalty and penalty for the submission

of incorrect return(s).

5.4 If the making of exempt supply of residential properties did not commence

within 4 years from the date of purchase of the land, the GST-registered

developer will need to inform the Comptroller. The Comptroller has the right to

deny the claim previously made.

5.5 Subsequent to the claim, if the GST-registered developer is unable to proceed

with the residential development and intends to dispose of or transfer the

property to another party, he is required to repay the GST claimed for the

portion of the land previously intended to be used for residential development.

7 The Valuation Report should show the land cost (purchase price of the land) attributable to the

residential and non-residential portion of the proposed development respectively. The gross floor

area (GFA) of the residential and non-residential portion of the proposed development in the

Valuation Report should match with the WP.

6

This would occur in situations where the disposal or transfer of the vacant

land or land with building is an exempt supply. Otherwise, GST should be

charged and accounted on the taxable supplies made from the sales. In this

case, there will not be a need to repay the GST previously claimed.

Application for Remission

5.6 To apply for a remission, the non GST-registered developer has to furnish the

following details in writing to the Comptroller of GST:

(a) Location of the land including legal description of the property;

(b) Date of purchase;

(c) Purchase price and amount of GST payable;

(d) Description of the proposed development, stating specifically if it is a

wholly residential development, or a mixed residential and non-

residential development;

(e) Amount of GST sought for remission. In the case of a mixed

development, or the purchase of a land with building on it, this should

be supported by a professional valuation of the land cost attributable to

residential development, and/or cost attributable to the existing building

(which will not be demolished, or is put to temporary use before

demolition) on the land;

(f) Completion date of demolition of existing building(s) on the land (if the

building is not to be retained);

(g) Date of commencement of the development (e.g. commencement date

of construction); and

(h) Expected date of completion of the development.

5.7 The non GST-registered developer also has to attach a copy of the

documents listed under paragraph 5.1(g) above in his application for

remission.

6 Contact Information

6.1 For enquiries on this e-Tax guide, please contact:

Goods & Services Tax Division

Inland Revenue Authority of Singapore

55 Newton Road

Singapore 307987

Tel: 1800 356 8633

Fax: (+65) 6351 3553

Email: gst@iras.gov.sg

7

7 Updates and amendments

Date of

amendment Amendments made

1 1 Jan 2018  Amended paragraph 2.1 on definition of

residential properties