Is it better to own a Property as an individual or pte ltd

[Investor]

Hi
I am hoping to garner some feedback regarding the pros and cons (legal, financial,tax,estate , ease of loan approval ) between owning an investment property as an individual and as a private limited company.

I have heard from some gurus that there are many benefits of owning a property as a company but I would like to hear what they are in Singapore terms

I am curious if these benefits will outweigh what I believe are lower loan interest rates for an individual ( I was always quoted a higher interest rate when I asked the question from a business perspective ie business loan)

[Dennis Ng]

Hi
I am hoping to garner some feedback regarding the pros and cons (legal, financial,tax,estate , ease of loan approval ) between owning an investment property as an individual and as a private limited company.

I have heard from some gurus that there are many benefits of owning a property as a company but I would like to hear what they are in Singapore terms

I am curious if these benefits will outweigh what I believe are lower loan interest rates for an individual ( I was always quoted a higher interest rate when I asked the question from a business perspective ie business loan)

My comments:
it depends on how many properties you own and your objectives.

If a person is just buying one property, he/she might not want to set up a company.

Owning properties using a company has the following advantages:
1. perpetuity - when shareholders pass away, the shares can just be passed on to whoever he/she wants. Whereas if ownership is by individual, to transfer ownership would involve stamp duty on transfer of property.

2. company can have expenses of operating the company which can be deducted from the rental income of the property. An individual cannot do this.

3. for a newly set up company in S'pore, the first S$100,000 profit of the company is NOT taxable. While rental income would straight away add on to an individual's taxable income.

Disadvantages:
1. even if property is owned by company, banks would typically still require the shareholders to provide personal guarantee to the repayment of the loan on property.

2. yes, an individual can say he buy for owner-occupation. A company is difficult to justify buying a residential property for self-occupation. Typically, interest rates charged for company is higher than a self-occupation property owned by an individual.

3. quantum of financing is also typically lower. For instance, an individual can get up to 90% financing on a property in Singapore. For companies, typically 70% to 80% would be max.

4. you need to file documents including tax returns for a company. It can be additional hassle if you are not familiar with preparation of accounts and corporate tax filing.

Please feel free to call us at 6339 9255 or email to info@HousingLoanSG.com for further clarification or discussion.

[Investor]

Thank you for your prompt reply. I really appreciate it.

2. company can have expenses of operating the company which can be deducted from the rental income of the property. An individual cannot do this.

I understand that one of the benefits of to set up a company is that income is taxed after deducting expenses. I noticed that in the recent IRAS efiling procedure for indivduals, sections were provided for deducting " Property Tax, Mortgage Loan Interest, Fire Insurance, Repairs, Maintenance,Commission, Others "

I gather from your reply that there are other company operating expenses for deduction before tax.

Is depreciation of the property one of these expenses applicable for a company deduction but not for individual deduction?

I read from somewhere that depreciation locally applies to machinery and factory assets. Hence I am not sure if depreciation applies for Singapore property.

I look forward to your reply.

Cheers

[Dennis Ng]

Dear Investor,

depreciation is typically not allowable on a property unless it is a very short term lease such as 30 years.

Other expenses a company can declare are company expenses which can include things like staff/director salary, expenses, and so forth, which an individual cannot claim.

[JosephTeo]

Dear Dennis,

For example, for a foreigner (Malaysian) who wish to become Singapore PR by investing more than 2 properties in Singapore. Is it wise for that foreigner to start a company in Singapore?

Similarly, for a Singaporean who intend to own more than 2 properties locally and maybe own overseas properties, Is it wise for that him/her to start a company in Singapore?

Regards,
Joseph Teo

Hi
I am hoping to garner some feedback regarding the pros and cons (legal, financial,tax,estate , ease of loan approval ) between owning an investment property as an individual and as a private limited company.

I have heard from some gurus that there are many benefits of owning a property as a company but I would like to hear what they are in Singapore terms

I am curious if these benefits will outweigh what I believe are lower loan interest rates for an individual ( I was always quoted a higher interest rate when I asked the question from a business perspective ie business loan)

My comments:
it depends on how many properties you own and your objectives.

If a person is just buying one property, he/she might not want to set up a company.

Owning properties using a company has the following advantages:
1. perpetuity - when shareholders pass away, the shares can just be passed on to whoever he/she wants. Whereas if ownership is by individual, to transfer ownership would involve stamp duty on transfer of property.

2. company can have expenses of operating the company which can be deducted from the rental income of the property. An individual cannot do this.

3. for a newly set up company in S'pore, the first S$100,000 profit of the company is NOT taxable. While rental income would straight away add on to an individual's taxable income.

Disadvantages:
1. even if property is owned by company, banks would typically still require the shareholders to provide personal guarantee to the repayment of the loan on property.

2. yes, an individual can say he buy for owner-occupation. A company is difficult to justify buying a residential property for self-occupation. Typically, interest rates charged for company is higher than a self-occupation property owned by an individual.

3. quantum of financing is also typically lower. For instance, an individual can get up to 90% financing on a property in Singapore. For companies, typically 70% to 80% would be max.

4. you need to file documents including tax returns for a company. It can be additional hassle if you are not familiar with preparation of accounts and corporate tax filing.

Please feel free to call us at 6339 9255 or email to info@HousingLoanSG.com for further clarification or discussion.

[Dennis Ng]

Hi JosephTeo,

I've explained the advantages and disadvantages. If one wants to buy 2 properties, don't bother about setting up company, that's my opinion.

Cheers!

Dennis Ng

Dear Dennis,

For example, for a foreigner (Malaysian) who wish to become Singapore PR by investing more than 2 properties in Singapore. Is it wise for that foreigner to start a company in Singapore?

Similarly, for a Singaporean who intend to own more than 2 properties locally and maybe own overseas properties, Is it wise for that him/her to start a company in Singapore?

Regards,
Joseph Teo

Hi
I am hoping to garner some feedback regarding the pros and cons (legal, financial,tax,estate , ease of loan approval ) between owning an investment property as an individual and as a private limited company.

I have heard from some gurus that there are many benefits of owning a property as a company but I would like to hear what they are in Singapore terms

I am curious if these benefits will outweigh what I believe are lower loan interest rates for an individual ( I was always quoted a higher interest rate when I asked the question from a business perspective ie business loan)

My comments:
it depends on how many properties you own and your objectives.

If a person is just buying one property, he/she might not want to set up a company.

Owning properties using a company has the following advantages:
1. perpetuity - when shareholders pass away, the shares can just be passed on to whoever he/she wants. Whereas if ownership is by individual, to transfer ownership would involve stamp duty on transfer of property.

2. company can have expenses of operating the company which can be deducted from the rental income of the property. An individual cannot do this.

3. for a newly set up company in S'pore, the first S$100,000 profit of the company is NOT taxable. While rental income would straight away add on to an individual's taxable income.

Disadvantages:
1. even if property is owned by company, banks would typically still require the shareholders to provide personal guarantee to the repayment of the loan on property.

2. yes, an individual can say he buy for owner-occupation. A company is difficult to justify buying a residential property for self-occupation. Typically, interest rates charged for company is higher than a self-occupation property owned by an individual.

3. quantum of financing is also typically lower. For instance, an individual can get up to 90% financing on a property in Singapore. For companies, typically 70% to 80% would be max.

4. you need to file documents including tax returns for a company. It can be additional hassle if you are not familiar with preparation of accounts and corporate tax filing.

Please feel free to call us at 6339 9255 or email to info@HousingLoanSG.com for further clarification or discussion.

[JosephTeo]

Dear Dennis,

Thanks for your prompt reply. In your opinion, what is the minimum of properties one needs to own to justify in setting a company?

Regards,
Joseph Teo

[quote="Dennis Ng"]Hi JosephTeo,

I've explained the advantages and disadvantages. If one wants to buy 2 properties, don't bother about setting up company, that's my opinion.

Cheers!

Dennis Ng