1. Following the recent public consultation exercise, the Ministry of Finance has decided not to change the current income tax framework with regard to individuals who sell their properties.
2. Under the current framework, IRAS considers the facts and circumstances of each case to determine if the individual owner concerned should be subject to income tax on the property disposal gains. In practice, IRAS has assessed gains from property disposals to be taxable income for only a small number of individuals – typically those who regularly transact in property.
3. Under the proposal that was put up for public consultation, individuals who sold their properties would be certain that the gains they made would not be subject to income tax if they had not sold any other properties in the preceding four years. Under all other circumstances, whether the gains from a property sale were subject to income tax would have continued to depend on the facts and circumstances of the case.
4. The proposed change to the Income Tax Act was in response to public feedback over the years that there should be certainty of non-taxation for individuals who did not transact frequently in properties. As the Ministry of Finance has emphasised earlier, the proposal concerned changes in the income tax framework from a long term perspective, and was not aimed at influencing the property market cycle. In particular, the proposed change involved no tightening of the current income tax treatment for individuals who sell their properties.
5. The proposal was put up for feedback under the Income Tax Act public consultation exercise from 22 June to 14 July 2009. 64 comments were received on the proposed relaxation of income tax treatment for individuals who sell their properties. Of these, 60 comments were not in support of the proposed change. Salient public feedback on the proposed change included the following:
   • The proposed change could bias property purchase decisions towards investing in one bigger property rather than numerous smaller properties. This is because certainty of non-taxation would be provided for disposal of one property within any four years, regardless of the property’s value.
   • There were many other possible factors, besides the frequency of property disposal, which could merit granting certainty of non-taxation. These factors include the holding period of the particular property (for example, a property may have been held for a very long time but disposed off together with another property within the same four-year period). Other factors include the circumstances leading to the disposal. However, to cater to all such factors would not be straight forward, and would make the income tax treatment for property disposals complex.
   • The proposed change could create inadvertent uncertainty for individuals who sell more than one property within any four years, even though there was no change to the current income tax treatment for such cases.
6. The Ministry of Finance sees merits in these points raised in the public feedback to the proposed change. It has also considered possible alternatives for providing certainty of non-taxation to individuals who sell their properties. The alternatives, however, bring drawbacks and complexities of their own.
7. The Ministry has therefore decided that it is, on balance, best to retain the current framework of income tax treatment for individuals who sell their properties. With this decision, IRAS will continue to consider the facts and circumstances of each disposal to determine if the individual owner concerned should be subject to income tax on the property disposal gains.
8. This current approach of levying income tax on individuals who derive income from selling their properties is a common tax treatment adopted in many other jurisdictions^[1] - irrespective of whether that jurisdiction imposes a capital gains tax on property transactions.
9. The facts and circumstances that IRAS considers in determining whether an individual is deriving income from selling his property, similar to other tax authorities, include the situation leading to the sale, how long the individual has held the property, and how frequently he has been selling properties. As in the past, IRAS does not expect that many individuals will be assessed as having to pay income tax on gains from selling their property.
10. The government’s response to public feedback on the other changes to the Income Tax Act are contained in another press statement (“MOF accepts for implementation majority of suggestions received on draft Income Tax (Amendment) Bill 2009”) released today.

MINISTRY OF FINANCE
21 August 2009