28 May 2021

On 10 May 2021, the Land Betterment Charge Bill (“Bill”) was read the second time and passed in Parliament. The Bill consolidates the collection of charges for the enhancement of the value of land under a single agency, the Singapore Land Authority (“SLA”). This will simplify the process of collection and provide greater transparency for landowners and developers.

In a speech delivered at the Second Reading of the Bill, Second Minister for Law Edwin Tong explained that the Bill seeks to introduce a tax, called a land betterment charge (“LBC”), in relation to land. The LBC is a tax on the increase in land value resulting from a chargeable consent given in relation to the land, on or after the Bill comes into operation. It ensures the return to the community of an appropriate amount or proportion of economic benefit from the grant of rights to develop or otherwise use land. The money collected as LBC can then be used to fund a wide range of infrastructure development and public programmes undertaken by the Government.

The LBC is not a new charge. There is currently an existing framework under which the Urban Redevelopment Authority (“URA”) collects the development charge (“DC”) and temporary development levy (“TDL”) under the Planning Act, and the SLA collects the differential premium (“DP”). Under the current framework, landowners and developers have to pay:

  • a DC or a TDL to URA, where the grant of planning permission for a development proposal regarding land results in an enhancement in land value, or 
  • a DP to SLA, if there is an enhancement in land value resulting from a waiver or a variation of a restrictive covenant contained in the State title of that piece of land.

Under the Bill, a single LBC will replace the DC, TDL and DP. Those three charges are similar in nature as they all impose in different ways a charge on the increase in value of land resulting from chargeable consents. The principles for computing LBC and proposed rates of charging will remain largely unchanged from the current regime.

A key change under the Bill is that LBC will be charged by and collected by a single agency - the Singapore Land Authority. Landowners and developers will benefit as they would no longer have to apply to various public sector agencies for the payment of such charges.

Rate of LBC

The rate at which LBC will be imposed will be a percentage of the increase in the value of the land likely to accrue from the giving of the chargeable consent. The rate itself will not be set out in the Bill. It will instead be set out by the Minister for Law in regulations, and will be reviewed periodically as necessary.

It is stated in the Second Reading Speech that the LBC rate will be set at 70% of the increase in land value arising from the grant of consent for proposals involving the development of land, which is similar to what it currently is today.

In certain cases, the LBC rate will be higher, based on 100% of the increase in land value, for example, where the State title contains a restrictive covenant on change of land use, because the land was previously sold by the State directly to the lessee without a tender. This is also the case today. The current practice is to collect DP at 100% of the enhancement of land value, if there were to be a material change of use of that piece of land.

Reference materials

The following materials are available on the Ministry of Law website www.mlaw.gov.sg and the Parliament website www.parliament.gov.sg: