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How to Calculate Stamp Duty for Leases

How to Calculate Stamp Duty for Leases

We know that whenever we enter into any property sales or lease agreement in Singapore, all buyers and tenants are required pay the necessary stamp duties. Stamp duty is payable to the Inland Revenue Authority of Singapore (IRAS) which is a Statutory Board in charge of tax collection in Singapore.

For rental agreement in Singapore, for all properties regardless whether you are renting a warehouse / factory, business park, HDB, condominium or other types of properties, the stamp duty is to be borne by the tenant. The amount of stamp duty depends on the agreed rental amount or the market rental rate, whichever is higher as well as the duration of lease.

Various Types of Leases with Stamp Duty is Payable

For simplicity sake, we shall look at formula for calculating stamp duty for leases with fixed rental rates. There are also different methods for calculating stamp duty for leases with premium involved, leases with staggered rental rates, leases with novation or assignment involved, surrender of lease, leases with increase in rental rates or extension of lease periods but we shall look at leases with fixed rental rates which is commonly used most of the time so as not to confuse you.

Stamp Duty Calculation for Leases with Fixed Rental Rates

When the average annual rent exceeds a thousand Singapore dollars and if the lease period does not exceed 4 years, the formula for calculating stamp duty will be 0.4% of the the total rental for the entire lease period.

For example, if agreed fixed rental is $1,000 a month for a 3 years lease, the calculation will be as follows :

0.4% x $1,000 x 36 months = $144

For leases exceeding 4 years, for example a 5 year lease with agreed fixed rental rate of $1,000 a month, the calculation will be as follows (average annual rent in this case is $12,000) :

0.4% x 4 Times the average annual rent =
0.4% x 4 x ($1,000 x 12 months) =
0.4% x 4 x (12,000) = $192

For leases with average annual rent of $1,000 and below, there is no stamp duty payable by the tenant and the tenant is exempted from paying stamp duty.

How to Ensure the Stamp Duty Amount is Correct

One way of calculating the stamp duty will be to follow the formula and input the correct figures into your calculator manually. However, there is actually a quicker way to do it if you are using your computer. You may use the stamp duty calculator which is available on IRAS’s website and input the applicable figures such as the period of lease, the monthly rental rate and any other figures where applicable. Once the correct figures are keyed in, the stamp duty amount payable will be shown on the stamp duty calculator.

When Should Tenants Pay Stamp Duty

If the tenancy agreement is signed in Singapore, the time frame to avoid any penalty will be within 14 days after signing the tenancy agreement.

In cases where the tenancy agreement is signed overseas, the time frame to avoid any late payment charges will be within 30 days after receiving the agreement in Singapore.

How to Pay Stamp Duty

Paying the stamp duty amount due is not that difficult. IRAS has a e-stamping portal under e-services which allows you to make the necessary payments for stamp duty online via e-nets. Simply key in the right details such as rental amount, period of lease, landlord and tenant particulars and make the necessary payment. You may also need to prepare your bank’s security token to complete the payment.

Why it is Important to Stamp Your Documents on Time

It is advisable to make the necessary arrangements to pay the stamp duty due on time as late payment charges may be incurred. Based on the time frame allowed, there is usually more than sufficient time to stamp the documents so be sure to remember to do it within the given period to avoid any penalties.