A property developer may develop properties either for sale or for long-term investments. The company's intention at the start of the development may determine the taxability of the profits from the sale of the developed properties.
Information that you need to provide at the point of filing of tax return:
Purchase of property
- Address of the property;
- Date of purchase;
- Purchase price and incidental expenses;
- Name and identification number (NRIC/FIN/ROB/ROC, etc.) of the vendor and whether the vendor is in anyway related to the company, its directors or shareholders. If so, furnish nature of relationship and state whether the purchase price was reflective of the open market value of the property as at the date of purchase;
- Purpose of the purchase at the point of purchase (e.g. for sale or investment); and
- Means of financing the purchase (e.g. bank loans, overdraft, etc.)
Development of property
- If development of the property has commenced, state:
- Description of the development;
- Total number of units and floor area of units to be built;
- Date or expected date of TOP (Temporary Occupation Permit); and
- An analysis of the development expenses and state the nature and amount of disallowable items included.
Sale of property
- Date of TOP;
- Computation showing the adjusted profit or loss for income tax purposes;
- For each unit sold to related parties*, state:
- Official address of the unit;
- Full name and identification number (NRIC/FIN/ROB/ROC, etc.) of the purchaser and how the purchaser is related to the company, its directors or shareholders;
- Contracted date of sale, sale price and the floor area of the unit; and
- Whether the sale price was reflective of the open market value of the property as at the date of sale.
* A person shall be deemed to be related to another where one person, whether directly or indirectly, has the ability to control the other or where both of them, whether directly or indirectly, are under the control of a common person.
Claim for provision for diminution in value of unsold units (trading stock)
FAQs
For income tax purposes, even though accounts are prepared using the percentage of completion method, profits of a developer will be recognized on completion of the project i.e. when a TOP is issued.
The total amount of the taxable sale proceeds will depend on the amount due and payable at TOP date in accordance with the payment schedule in the Sales & Purchase Agreement.
Yes, these are part of the product costs.
A specific provision made on a completed property is deductible subject to the following conditions:
- The market value must be supported by an independent valuation; and
- Once the provision is claimed, a stock, valuation in respect of each unsold property, must be made each year and supported by an independent valuation. Any excess provision should be written back and assessed in that year.