SINGAPORE - The taxman is entitled to disregard pre-sold units on a property that is still being built when assessing the annual value of the land, the highest court in Singapore has ruled.
In a written judgment released on Friday, the Court of Appeal ruled in favour of the Inland Revenue of Authority of Singapore (Iras) in a property tax case involving waterfront condominium The Sail @ Marina Bay.
The case centred on the interpretation of "vacant land" in the Property Tax Act, which states that Iras can assess the value of a property under development with reference to the estimated value of the land "as if it were vacant land with no building erected, or being erected".
But the developer, Glengary, argued that units pre-sold ahead of the property's completion cannot be ignored in the formula as they are "encumbrances" which affect the development value of the land.
In this case, it would have had the effect of holding the land at 2005 prices, though property prices soared afterwards.
"The landmark ruling... has affirmed Iras' longstanding practice of disregarding any pre-sales in determining the annual value of the land for property tax purposes," an Iras spokesman said when asked for comment.
The spokesman said that when pre-sales do not give a good indication of the prevailing market value of the land, it would be valued as though vacant and the assessment would take into account the prevailing market value.
The ruling means Iras will not have to refund about $3.15 million in property taxes to Glengary.