When a Singapore company lets out property it owns, such as an industrial unit, shophouse or office it no longer fully needs, the rent is taxable under section 10(1)(f) of the Income Tax Act 1947 as income from property, not as part of its trading profit. The company may deduct revenue expenses incurred to earn that rent, including loan interest, property tax, repairs, management fees and insurance, but not capital costs. If the expenses exceed the rent, IRAS treats the net rental income as nil: the excess cannot be set against other income or carried forward. Commercial rent may also attract GST.
Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.
Is rent received by a company taxed as business income or as separate income?
For most companies, rent is a separate source of income taxed under section 10(1)(f) of the Income Tax Act 1947. IRAS’s investment holding company guidance refers to rental income taxable under that section, and the Form C-S explanatory notes give rent from real property as an example of “separate source income”, meaning income other than from the company’s principal activity.
This matters because the rental source is computed on its own. Your trading profit is worked out first, the net rent separately, and the two are then added together.
In a smaller number of cases, letting with substantial services may be the company’s actual business. That depends on the facts, so have the position reviewed before treating rent as trade income.
Which expenses can the company deduct against the rent?
IRAS allows revenue expenses that are directly incurred to earn the rental income. The Form C-S explanatory notes for Year of Assessment (YA) 2026 list interest on the loan used to acquire the property, insurance, property tax, and repair and maintenance as examples. IRAS’s investment holding company guidance adds the cost of collecting rent and MCST management fees.
| Expense | Usual treatment | Points to check |
|---|---|---|
| Interest on the loan used to buy the property | Deductible against the rent | Only the interest, not principal repayments; apportion if part of the property is used by the company itself |
| Property tax | Deductible against the rent | Keep the IRAS property tax bills for the period the property was let |
| Repairs and maintenance | Deductible | Must restore the property, not improve it or add new assets |
| MCST or management fees | Deductible | Invoices should relate to the let unit and the period it was let |
| Fire and building insurance | Deductible | Policy should relate to the let property |
| Agent commission, advertising, legal fees and stamp duty to secure a tenant | Deductible from YA 2022 under section 14ZE, subject to conditions | No deduction for a lease longer than three years, among other exclusions |
| Costs during a vacancy between tenancies | Repairs, insurance, maintenance, upkeep and property tax deductible from YA 2022 under section 14ZF | Reasonable efforts must have been made to find a new tenant |
Where the company occupies part of the building and lets out the rest, shared costs need to be split on a reasonable basis, commonly floor area. The let share goes against the rent; the owner-occupied share is considered under the company’s trade.
What is not deductible?
- The purchase price and principal repayments. These are capital.
- Stamp duty and legal fees on buying the property. IRAS treats these as capital costs of acquiring the investment.
- Initial renovation, new fittings and furniture. IRAS’s guidance describes the cost of initial new assets for a property, such as furniture and refrigerators, as capital expenses.
- Expenses before the property first produces rent. IRAS states that expenses incurred before the property starts producing rental income are not deductible, apart from the specific first-tenant costs now covered by section 14ZE.
- Depreciation in the accounts. This is added back in the tax computation like any other depreciation.
Can the company claim capital allowances on the building?
Generally, no. Capital allowances are given on plant and machinery used in a trade or business, and a commercial building is not plant. The Industrial Building Allowance was phased out: IRAS’s e-Tax Guide on the phase-out states that it is no longer available for capital expenditure incurred after 22 February 2010 to construct or purchase an industrial building, although claims on earlier expenditure could continue under transitional rules until the expenditure is written down or the building is disposed of. A company buying an industrial unit today should not expect any allowance on the building itself.
IRAS also states that an investment holding company is not entitled to capital allowances because it is not carrying on a trade. A trading company still claims allowances on plant used in its own trade in the normal way.
What happens if the rental expenses exceed the rent?
The Form C-S explanatory notes state that if net rental income is negative, nil is shown, and that expenses in excess of rental income cannot be deducted against any other type of income or carried forward. A rental shortfall does not reduce trading profit and is not a tax loss for next year.
A high interest year or long vacancy can therefore produce a cash loss with no tax relief. Factor that into decisions on keeping the property or restructuring the loan.
Example: a trading company lets out a spare industrial unit
Example: A hypothetical engineering company, with a 31 December year end, owns two industrial units. It moved its workshop into one unit and let out the other from 1 January 2026 at S$6,000 a month on a two-year lease. For the year ended 31 December 2026 (YA 2027), its records show the following for the let unit:
| Item | S$ |
|---|---|
| Gross rent (12 x S$6,000) | 72,000 |
| Less: interest on the loan used to buy the let unit | (18,000) |
| Less: property tax for the let unit | (7,200) |
| Less: MCST management fees | (4,800) |
| Less: repairs to the air-conditioning and roller shutter | (2,000) |
| Less: agent commission for securing the tenant | (3,000) |
| Less: building insurance | (600) |
| Net rental income | 36,400 |
The S$25,000 the company spent partitioning the unit before the tenant moved in is initial capital work and is excluded, and depreciation is added back. With an adjusted trading profit of S$150,000, chargeable income before exemptions is S$186,400.
If the unit had been vacant for most of the year and the rent had been only S$20,000 against S$30,000 of deductible expenses, the net rental income would be nil. The S$10,000 shortfall could not reduce the S$150,000 trading profit.
Do the tax exemptions and the CIT rebate apply to rental income?
The partial tax exemption applies to the company’s chargeable income as a whole, so net rent is included in the income that benefits from it. In the YA 2026 Form C-S worked example, the exemption is computed as 75% of the first S$10,000 and 50% of the next portion of chargeable income, and IRAS has announced a 50% CIT rebate for YA 2026 with a S$2,000 cash grant for qualifying companies with a local employee. Check the rebate announced for the relevant YA, as these change each Budget.
IRAS states that investment holding companies are not eligible for the start-up tax exemption, although they remain eligible for the partial exemption. If letting is your company’s main activity, our article on the tax treatment of investment holding companies is the more relevant guide.
Where does rental income go in the ECI and Form C-S?
- Estimated Chargeable Income. Include the expected net rent when estimating chargeable income. Our guide to ECI filing deadlines and the revenue waiver explains when ECI must be filed.
- Revenue test. For Form C-S eligibility, revenue means income from the principal activity, excluding separate source income such as rent. For an investment holding company, revenue is its investment income.
- Item 2, Separate Source Income. Deduct the gross rent from the accounting profit so it is not counted twice.
- Item 4 adjustments. Add back rental expenses already charged in the profit and loss account, since they are deducted under the rental source instead.
- Items 14a, 14b and 14c. Enter gross rental income, deductible rental expenses, and the resulting net rental income. A negative result is shown as nil.
If you are unsure whether the company should file Form C-S, Form C-S (Lite) or Form C, see our comparison of Form C-S, C-S (Lite) and Form C.
Does the company need to charge GST on the rent?
Only if the company is GST-registered, and only on the right type of property. IRAS states that the lease of residential property is exempt from GST, while rent from commercial and industrial property is a standard-rated supply, currently at 9%. For a shophouse with a residential upper floor, the rent must be apportioned: the residential part is exempt and the commercial part is standard-rated.
Commercial rent counts towards taxable turnover, so a company that starts letting out a large unit should check whether it now crosses the S$1 million registration threshold. Our guide on how to apply for GST registration sets out the process. Input tax incurred in making exempt residential lettings is generally not claimable.
Property tax is a separate tax on the property’s annual value, payable by the owner; our guide to property tax for companies covers the rates.
Which records should the company keep?
- Tenancy agreements and stamp duty certificates
- Rent invoices and bank statements showing rent received
- Loan statements showing interest on the property loan
- Property tax bills, MCST invoices and insurance policies
- Repair invoices describing the work done
- Agent commission invoices, and evidence of efforts to find a tenant during any vacancy
- Floor area calculations supporting any apportionment
Keep these for at least five years, as for other tax records.
Frequently asked questions
Can the company deduct the interest on the whole property loan?
Only the interest attributable to the let portion is deductible against the rent. If the company occupies part of the property for its own trade, the interest on that part is considered under its trade instead. If the loan was used partly for other purposes, the interest must be traced to its use.
Can a rental shortfall be used against next year’s rent?
No. Excess rental expenses cannot be carried forward; each year’s rental source is computed on its own.
Can the company still file Form C-S if it has rental income?
Yes, if it meets the qualifying conditions. Rent is separate source income and is excluded from the S$5 million revenue test for a trading company, and normally taxed rent does not stop a company from filing Form C-S, provided all its income is taxable at the 17% rate.
Does the company need to tell IRAS when it starts letting a property?
There is no separate notification for income tax purposes; the rent is declared in the ECI and the annual Form C-S or Form C. The GST position, stamp duty on the lease and any change in the property tax annual value need to be dealt with separately.
Official sources: IRAS: investment holding companies, IRAS: GST and real estate, IRAS: Form C-S explanatory notes.
Need help with the tax on your company’s rental income?
If your company lets out an industrial unit, shophouse or office, Raffles Corporate Services can keep the rental records in your books, prepare the tax computation with the rental source and any apportionment worked out, file the ECI and Form C-S or Form C, and review whether GST registration is needed. Contact us at [email protected] or on WhatsApp at +65 8501 7133.
Kevin Yeo, Raffles Corporate Services