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1. How is Annual Value (AV) determined?

Buildings
The AV is the estimated annual rent of your property if it were to be rented
out, excluding the furniture, furnishings and maintenance fees.
It is estimated based on market rentals of similar or comparable properties.
The basis of determining the AV is the same whether the property is rented
out, owner-occupied or left vacant.
If your property is rented out, the AV could be higher or lower than your actual
rents as the AV reflects the market rent at the time of review, while your actual
rents were committed earlier.
Illustration (A):
Estimated market rent of your flat is $1,000 per month
Annual Value is: $1,000 x 12 = $12,000

*Property Tax payable is derived by subsequently applying the relevant tax rate (%)
on the AV.
Why AV is derived based on rental instead of transacted sale price?

The rental transactions of comparable properties are used to estimate the AV


of the property, for two reasons.
First, there are generally more rental transactions than sales transactions to
allow AV to be determined for each property based on comparable properties.
Second, movements in sale prices are more volatile than rentals.
Hence, using rental transactions to derive the AV helps to keep property tax
more stable for property owners.
This practice of using market rents to determine the AV is also adopted by
other countries like Hong Kong and Malaysia.
As property tax is a wealth tax based on property ownership, the property tax
should take account of the prevailing value of the property as determined from
prevailing rental transactions instead of historical purchase price.
Using historical purchase price to estimate AV would be inequitable towards
newer owners because for similar and comparable properties, the property tax
would differ depending on the time of purchase.

B) Land and Development Site


The Annual Value is determined at 5% of its estimated freehold market value.
Illustration (B):
The market value of your land is $1,000,000
Annual Value is: 5% x $1,000,000 = $50,000

C) Some Specialised Properties

Certain categories of properties (such as hotels, ports, refineries, etc.) may be


assessed using the statutory formula or prescribed methods of assessment.
For some properties (such as petrochemical and power plants, etc.) which are
rarely let or where there is no rental evidence, valuation methods using costs
and receipts may be used to estimate their market rents.

2. When will the Annual Value (AV) be revised?

As property tax is a wealth tax based on property ownership, the AV should


be reviewed yearly to adjust to reflect the change in market values of
comparable property.
A review may or may not result in a revision to the AV. If the review could lead
to an upward or downward adjustment to the AV.
Should your property undergo physical changes that could materially affect its
rental value, its AV would also be revised accordingly from the date of change.