Looking to invest in a commercial property? Save more when you buy through your company

11 May 2020

Key Takeaways

  • The Government's Unity, Resilience and Solidarity Budgets offers additional incentives to SMEs through commercial property tax and corporate income tax rebates
  • Such rebates, coupled with lower corporate income tax rates, mean that it is more advantageous to purchase commercial property through a company than as an individual
  • UOB's Business & Commercial Property Loan can help SMEs obtain financing with as low as 10 per cent down payment plus one-day approval turnaround times.

In its Resilience1 and Solidarity Budget2 2020, the government has unveiled over S$60 billion in support to help SMEs and workers get through a challenging year. As part of these packages, owners of qualifying commercial properties can receive rebates of 30 to 100 per cent for the year 20203. The type of properties that qualify for the respective rebate amounts are:

  • For the 100 per cent rebate: Hotels, serviced apartments, tourist attractions, shops, and restaurants
  • For the 60 per cent rebate: All premises in both Marina Bay Sands and Resorts World Sentosa
  • For the 30 per cent rebate: Other non-residential properties such as offices and industrial premises

 

These rebates are, of course, not limited to just the business owners of commercial properties. People who own such properties as individuals are also eligible.

However, does this mean that there is no difference between buying commercial properties through a company or as an individual?

 

Buying commercial properties through companies vs. as individuals – a comparison

It is only in one specific aspect – the recent commercial property tax rebates – that the benefits of owning commercial properties through a company or as an individual are equal. In most other respects, buying them through a company offers clear advantages.

The table below provides an analysis on the differences between these two buying approaches from a tax and loan quantum perspective.

The Tax Perspective


Most commercial properties generate income for their owners, leading to taxes payable. Further, there are different tax exemptions and rebates applicable to companies and individuals.
Buying Through a Company Buying Individually
Corporate Income Tax Rate
Not including exemptions and rebates, corporate income tax is levied at a flat 17 per cent rate4.
Personal Income Tax Rate
Not including exemptions and rebates, personal income tax is levied on a progressive scale, reaching up to 22 per cent5.
Tax Emptions
Exemptions totalling S$102,500 as long as annual income is at least S$200,000. For newly incorporated companies, total exemptions increase to S$125,000, again assuming the same minimum annual chargeable income.
Tax Exemptions
The tax exemptions are already factored into the progressive taxation structure. However, additional reliefs may effectively raise the amount of tax that can be exempted.
Corporate Income Tax Rebates
25% corporate income tax rebate capped at S$15,000 for assessment year 2020.
Personal Income Tax Rebates
Personal income tax rebate of up to S$200 per individual for YA 20195.
Enhanced Commercial Property Tax Rebates3
Up to 100% in tax rebates for qualifying properties for assessment year 2020.
Enhanced Commercial Property Tax Rebates3
Up to 100% in tax rebates for qualifying properties for assessment year 2020.

Implication


While the wide variety of personal tax reliefs - such as the Working Mother's Child Relief - can change the balance somewhat, in general, it is more advantageous from a tax perspective to purchase a commercial property through a company. This is especially true if you are an SME with a turnover of more than S$1 million annually.

The Loan Quantum Perspective


The loan quantum you would be able to get to purchase a commercial property differs between companies and individuals because of the Total Debt Service Ratio (TDSR) requirements6 by the Monetary Authority of Singapore (MAS).

 

The conclusion is clear. Barring exceptional circumstances, it makes more sense for SME owners to purchase commercial properties through their companies than as individuals. Not only is it more tax-friendly, doing so also allows them to potentially buy higher-value properties.

 

If you are a business looking to purchase commercial property, UOB's Business & Commercial Property Loan allows you to own your business property with just 10 per cent down payment, with one business day^ approval turnarounds.

 

Apply online or get in touch with us today to find out more.

Apply online

 

^Terms and conditions apply.

 

Disclaimer: This publication is strictly for informational purposes only and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose, and is also not intended for distribution to, or use by, any person in any country where such distribution or use would be contrary to its laws or regulations. This publication is not an offer, recommendation, solicitation or advice to buy or sell any investment product/securities/instruments or enter into any transaction. Nothing in this publication constitutes accounting, legal, regulatory, tax, financial or other advice. Please consult your own professional advisors about the suitability of any transaction/ investment product/securities/ instruments for your investment objectives, financial situation and/or particular needs.

The information contained in this publication is based on certain assumptions and analysis of publicly available information and reflects prevailing conditions as of the date of the publication. Any opinions, projections and other forward-looking statements regarding future events or performance of, including but not limited to, countries, markets or companies are not necessarily indicative of, and may differ from actual events or results. The views expressed within this publication are solely those of the author’s and are independent of the actual trading positions of United Overseas Bank Limited, its subsidiaries, affiliates, directors, officers and employees (“UOB Group”). Views expressed reflect the author’s judgment as at the date of this publication and are subject to change.

UOB Group may have positions or other interests in, and may effect transactions in the securities/instruments mentioned in the publication. UOB Group may have also issued other reports, publications or documents expressing views which are different from those stated in this publication. Although every reasonable care has been taken to ensure the accuracy, completeness and objectivity of the information contained in this publication, UOB Group makes no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this publication.

 

References:
1https://www.singaporebudget.gov.sg/budget_2020/resilience-budget/supplementary-budget-statement
2https://www.singaporebudget.gov.sg/budget_2020/solidarity-budget/solidarity-budget-statement
3https://www.singaporebudget.gov.sg/docs/default-source/budget_2020/download/pdf/supplementary_annexb5.pdf
4https://www.iras.gov.sg/irashome/Quick-Links/Tax-Rates/Corporate-Tax-Rates/
5https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Income-Tax-Rates/
6https://www.mas.gov.sg/regulation/explainers/tdsr-for-property-loans/Who-TDSR-Applies-To

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