Singapore: Determining when certain machinery is excluded from property tax (court decision)

The Court of Appeal disagreed with a taxpayer company’s attempt to treat the value of its wind tunnel machinery as being excluded from Singapore’s property tax.

The case is: Skyventure VWT Singapore Pte Ltd v. Chief Assessor [2021] 2 SLR 116

Property tax is a tax on immovable property. Machinery that is affixed to land or buildings such that it constitutes part of the immovable property is subject to property tax—unless it is excluded from the tax. Under the “exclusion clause” of section 2(2) of the property tax law, the enhancement in value of immovable property is excluded from property tax if the machinery is used for the following qualifying purposes:

• The making of any article or part thereof
• The altering, repairing, ornamenting or finishing of any article
• The adapting for sale of any article

In the case before the court, the taxpayer company operated an indoor skydiving center and used wind tunnel machinery to provide customers with a simulated skydiving experience. Relying on the exclusion clause under section 2(2), the taxpayer asserted that the wind tunnel machinery was excluded from the property tax. Specifically, it asserted that the wind tunnel machinery was within the scope of the exclusion clause because: (1) it was machinery that altered and adapted air by increasing velocity and pressure while reducing the temperature of the air; and (2) this aerodynamic or lifting effect of the airflow was “sold” to customers paying for a simulated skydiving experience in the flight chamber of the wind tunnel.

The Court of Appeal held that the exclusion clause, which applies to situations when the machinery is used for the adapting for sale of any article, was not available for the taxpayer’s wind tunnel machinery because “there was … no ’sale’ of the ’adapted article’ (i.e., the aerodynamic effect of the airflow) as such.” While the wind tunnel machinery “did alter airflow so as to induce its skydiving-friendly aerodynamic properties,” this altered airflow was not an article that was intended to be sold “per se.”

In an earlier case, the Court of Appeal held that “machinery that chilled water, which was then piped to customers’ premises to provide a ‘district cooling service’, had adapted the water for sale” and was eligible for the exclusion from property tax. The two cases can be distinguished.

Read a September 2021 report [PDF 517 KB] prepared by the KPMG member firm in Singapore