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Budget 2023: Increased buyer's stamp duty for higher-value properties, higher taxes on luxury cars and tobacco products to bring in extra govt revenue

SINGAPORE — The Government is imposing higher taxes on luxury homes as well as more than half of non-residential properties with effect from Wednesday (Feb 15). This is expected to generate S$500 million in additional revenue a year.

Budget 2023: Increased buyer's stamp duty for higher-value properties, higher taxes on luxury cars and tobacco products to bring in extra govt revenue
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  • The Government is imposing higher taxes on luxury homes as well as more than half of non-residential properties with effect from Feb 15
  • This is expected to generate S$500 million in additional revenue a year
  • Higher taxes on vehicles and tobacco announced on Tuesday are also estimated estimated to bring in a combined additional revenue of S$300 million annually
  • Analysts felt the rise in non-residential property tax would have little impact on the market as firms would treat it as a business cost
  • In the case of residential property, some sales might be finalised quickly while about half of all private home transactions could be subject to the higher tax rates, they said

SINGAPORE — The Government is imposing higher taxes on luxury homes as well as more than half of non-residential properties with effect from Wednesday (Feb 15). This is expected to generate S$500 million in additional revenue a year.

Taxes on cigarettes and cars will also be hiked, in a move estimated to bring in a combined additional revenue of S$300 million annually.

Announcing the moves in the Budget 2023 speech on Tuesday, Deputy Prime Minister Lawrence Wong noted that he had already made major changes to strengthen Singapore’s tax structure in last year’s Budget, and is making further adjustments this year.

HIGHER TAXES ON PROPERTY BUYERS

“The top marginal Buyer’s Stamp Duty rate for residential and non-residential properties will be raised to enhance the progressivity of the Buyer’s Stamp Duty regime,” said the Ministry of Finance (MOF) in a statement on Tuesday.

The Buyer’s Stamp Duty is tax paid on documents signed for the purchase of a property here.

For residential properties, the portion of the value of the property over S$1.5 million and up to S$3 million will be taxed at 5 per cent, while the portion of the value in excess of $3 million will be taxed at 6 per cent.

Before Feb 15, all the portion of the value of a property in excess of S$1 million is taxed at 4 per cent.

For example, a residential property with a value of S$2 million will attract a Buyer's Stamp Duty of S$69,600, up 8 per cent from the prevailing S$64,600.

A residential property selling for S$3 million would attract S$119,600 in the updated tax, up 14.3 per cent from S$104,600.

A home that cost S$10million will now have a Buyer’s Stamp Duty of S$539,600, a 40.3 per cent increase over the S$384,600 currently.

Mr Wong, who is also Finance Minister, added that the additional conveyance duties regime will also be adjusted accordingly.

For non-residential properties, such as commercial properties, the portion of property value over S$1 million and up to S$1.5 million will be taxed at 4 per cent, while the portion of the value above S$1.5 million will be taxed at 5 per cent.

This is up from the rate before Feb 15 of 3 per cent being levied on the portion of the property value in excess of S$360,000.

These changes are expected to affect 15 per cent of residential properties and 60 per cent of non-residential properties, said Mr Wong.

The higher taxes on luxury homes is expected to generate S$500 million in additional revenue a year.

ADJUSTED ADDITIONAL REGISTRATION FEE FOR CARS, HIGHER TOBBACO TAXES

Mr Wong also said that there was still scope to make vehicle taxes “more progressive” following the changes introduced in last year’s Budget.

The Additional Registration Fee (ARF) will be adjusted to better differentiate higher-end cars and mass market ones, while luxury cars will also be taxed at a higher rate, he added.

For cars with the highest Open Market Value (OMV), ARF will be charged at 320 per cent on the amount in excess of S$80,000, up from the current 220 per cent.

Preferential ARF rebates, designed to encourage car and taxi owners to deregister their cars early, currently pegged as a percentage of the payable ARF, will also be capped at S$60,000.

This is to avoid providing excessive rebates to more expensive cars when they are deregistered, he said.

“These changes are expected to affect the top one-third of cars by OMV. Buyers of cars with an OMV of S$40,000 or less will be unaffected,” he said.

These changes will affect cars registered with Certificates of Entitlement obtained from the next bidding round this month, and are expected to generate about S$200 million in additional value per year, subject to the vehicles market conditions.

Excise duty on all tobacco products will also be increased by 15 per cent with effect from Tuesday, to discourage the consumption of such products, said Mr Wong.

For example, cigars, cigarettes and other manufactured tobacco are taxed S$427 per kg or 42.7 cents per stick of cigarette. Under the new taxation regime, such products will be taxed S$491 per kg, or 49.1 cents per stick.

This would bring in about S$100 million more revenue per year, said Mr Wong.

KNEE-JERK REACTIONS EXPECTED, BUT PROPERTY MARKET WILL STAY RESILIENT: ANALYSTS

Property analysts opined that the additional taxes on non-residential property would have little impact on the market.

“Businesses will likely fork out the higher stamp duties as part of the costs of acquiring their properties to conduct their operations,” said Mr Nicholas Mak, head of research and consultancy at ERA Realty Network.

Agreeing, chief executive officer of PropNex Realty Ismail Gafoor said he expects the market for “non-residential properties in Singapore will still be healthy, underpinned by the country’s sound fundamentals”.

As for residential property, Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie outlined the proportion of higher-end sales based on Urban Redevelopment Authority data.

She said 2022 data indicated that 15.4 per cent of private residential property transactions were at least S$3 million, while about 39.2 per cent were between S$1.5 million and S$3 million.

“Therefore, moving forward, about 50 per cent of transactions may be affected by the increased BSD if we use last year's data as an indication,” she said.

Ms Sun expects some “knee-jerk reaction” in the market.

Agreeing, Dr Lee Nai Jia from PropertyGuru Group added: “Based on previous instances where the tightening of policies was observed, we may see a sharp spike in sales today (Feb 14) as homebuyers in the later stages of their home-purchasing journey move to finalise their deals.”

Sales in the coming months would likely moderate as buyers “reframe their expectations”, added Dr Lee, who is the head of real estate intelligence, data and software solutions at the company.

Regardless, some other analysts felt that the overall impact might not be large.

Mr Mak noted how a S$2.6 million condominium would incur an additional S$11,000 in Buyer’s Stamp Duty, which “may not be extraordinarily significant” to buyers already willing to buy properties in that price range.

Putting things into perspective, he said: “The renovation cost would typically exceed the extra Buyer’s Stamp Duty payable under the new schedule.” 

The difference in Buyer’s Stamp Duty would be more apparent for more expensive properties though buyers of such luxury properties would be more likely to be unaffected by the additional costs, analysts said.

Mr Lee Sze Teck, senior director of research at Huttons Asia, said: “The change in buyer stamp duty rate may have to do with the increase in property values in the last year and the likely return of foreigners to the Singapore property market.”

He added that there was an increase in purchases of luxury residential properties by foreigners in 2022 “and possibly more in 2023”.

This group of buyers is unlikely to be discouraged by the additional taxes from buying properties, he said.

Ultimately, Mr Lee said, this makes the refined stamp duty rates “progressive”, with the more well-to-do paying more taxes which can then be used to help lower-income earners.

CORRECTION: An earlier version of this article stated that the higher taxes on cigarettes and cars will bring in a combined additional revenue of S$100 million annually. This is incorrect. They will bring in an additional S$300 million annually. We are sorry for the error.

Click here for latest updates and reports on Budget 2023. 

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