Sale of Commerical/Industrial (Non-Residential) Property: GST Considerations
The Inland Revenue Authority of Singapore (IRAS) conducts audits on businesses selling non-residential properties. GST-registered businesses must charge and account for GST on the sale of business assets, including non-residential properties, based on the consideration received from the sale.Key Points to Note When Selling Properties
When to Account for GST: 1. Option Fee and Deposit: GST should be accounted for on the option fee and deposit at the earlier of:-
- When payment is received
- When an invoice for the option fee or deposit is issued
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- When the invoice is issued
- When payment is received
- When the property title is transferred upon legal completion
- When the property is handed over or made available to the buyer
Common GST Mistakes When Selling Non-Residential Properties
1. Failure to Account for GST in Returns: Some GST-registered businesses fail to charge GST on the sale of non-residential properties or fail to include it in their GST returns due to oversight. Businesses must charge and account for GST if the properties sold are part of their business assets. 2. Late Accounting of GST on Option Fee: For property sales, businesses typically receive an option fee from the purchaser, followed by a deposit when the option is exercised. The remaining balance is due upon completion of the sale. Some businesses only account for GST on the option fee when the option is exercised or the sale is completed, which is incorrect. GST must be accounted for on the option fee at the earlier of when the fee is received or when the invoice for it is issued. 3. Transfer of Property Without Monetary Consideration (e.g., In-Specie Distribution): Some businesses fail to account for GST when transferring properties with no consideration received. However, if a business previously claimed input tax on the purchase of the property, GST must be accounted for on the transfer, even if no consideration is received. 4. Sale of Property by Sole-Proprietors and Partnerships: Some GST-registered sole-proprietors and partnerships fail to charge GST on the sale of their non-residential properties, not recognizing them as business assets. Sole-proprietors and partnerships must charge and account for GST in the following cases:-
- When the property is a business asset (e.g., if the property was used as a business asset in the accounts or if input tax was claimed on its purchase).
- If the business involves the leasing or sale of properties, satisfying the business test set out in the “GST: Guide for Property Owners and Property Holding Companies.”