Entrepreneurs never say die and this adage was proven by the high number of new enterprises set up last year.
Despite the pall that Covid cast on the business climate, 65,438 new enterprises were registered with the Accounting and Corporate Regulatory Authority in 2021. Their optimism despite the pandemic might be due to the government support and relief schemes which helped to sustain many businesses through the tough times.
The start of a new venture is exciting but before signing on the dotted line to rent a shop front, let’s learn about some common myths related to stamp duty which may cost entrepreneurs even before they earn their first dollar.
Myth 1: It’s the landlord’s duty to pay stamp duty
Check and double-check the terms and conditions stated in the lease agreement. If you rent a property, the lease agreement should state who is liable to pay stamp duty. When it is not stated in the lease agreement, the lessee will be the party liable to pay stamp duty and he/she is responsible for stamping the lease agreement.
Once the landlord or the tenant has signed the lease agreement, it must be stamped within 14 days after signing the document if it is signed in Singapore. If the document is signed overseas, it must be stamped within 30 days after receiving the document (which includes any electronic copy of it) in Singapore. If the lease agreement is not stamped within the applicable timeline, there will be a late stamping penalty payable. If you are renting a business premise for the first time, consult your estate agent or lawyer.
Myth 2: I’m only a sub-tenant so there’s no need to pay stamp duty
Under the Stamp Duties Act, stamp duty is payable on all lease agreements of any immovable property, including sub-lease agreements.
Even if you are just taking up part of the space for your business under the sub-lease agreement, it still needs to be stamped. Stamp duty on leases is payable based on the contractual or market rent, whichever is higher, generally at the lease duty rate of 0.4% of the total rent for the period of the lease (for definite lease periods of 4 years or less). For stamp duty purpose, rent includes other considerations such as payments for maintenance and service charges, furniture and fittings charges, and advertising and promotion charges, but excludes GST.
Myth 3: There’s no need to pay stamp duty on a lease renewal
Under the Stamp Duties Act, stamp duty is payable on all lease agreements of any immovable property, including lease renewal or extension agreements.
If you have executed a document for the renewal or extension of your lease, the document will be treated as a fresh instrument which must be stamped based on the period of the renewed or extended lease stated in the document. Stamp duty, being a tax on documents, is payable in full according to the lease period reflected in the document, once the transaction has been effected through the signing of the document.
Myth 4: My landlord showed me a stamped document so I can just lease the space without doing anymore paperwork
Lessees, don’t get duped by fake stamp certificates. As lessees, i.e., the parties liable to pay stamp duty, you are responsible for ensuring that your lease agreements are duly stamped, with a stamp certificate to show for it, even if your landlord or agent has stamped on your behalf.
To confirm if the stamp certificate is genuine, you may do an authenticity check at e-Stamping Portal and selecting “Stamp Duty” > “Check Stamp Cert Authenticity”. An authentic stamp certificate should bear the full details of the stamped lease agreement, which includes the document description, date of document, property address, parties’ details and stamp duty amount paid. Please also verify that the details on the stamp certificate match the information found on the e-Stamping Portal.
Myth 5: My agent says that I can pay less stamp duty if we declare a lower monthly rent
Stamp duty on leases is payable based on the contractual rent stated in the agreement or the market rent of the property, whichever is higher. For stamp duty purpose, you should not be declaring a lower rent than what is stated under the terms of the agreement. If parties decide to transact based on a contractual rent which is lower than the market rent of the property, stamp duty would still be payable based on the higher market rental value of the property.
Factbox: Stamp it right
Penalties of up to four times the deficient amount payable may be imposed on unstamped documents or documents found to be ‘understamped’ with insufficient stamp duty amount paid. IRAS may conduct audits to ensure that your document is stamped accurately, and the amount of stamp duty paid is correct. Being selected for an audit does not necessarily mean that you have made a mistake, but you will be required to provide timely, complete and accurate information to facilitate the audit review.
For more information on stamp duty for leases, please visit Renting a Property.