Paying taxes has always been a part of being an earning citizen in any country. Inheritance taxes, also known as death duties, were long a source of tax revenue for many countries. However, Singapore is one of those rare countries where the government completely abolished the Singapore inheritance law on 15 February 2008. It suggests, if death has occurred after that point, then the beneficiaries would no longer be liable for taxes.

This system has recently received criticism as law experts think that if the economy becomes sluggish, a lack of wealth tax will increase wealth parity with the rise of urge in social expenses. But if you still want to be aware of how the Singapore inheritance law charged the inheritance tax, then read on.

What is Inheritance Tax?

Inheritance tax used to be levied based on the cumulative market valuation of the deceased person’s properties under the Singapore legal system. In case you are unfamiliar with the term inheritance tax, it used to be known as Estate duty in Singapore. This used to be charged with or without a will on death day.

Estate referred to the dead individual’s assets in their entirety. However, there were a lot of exemptions offered on various types of investments. Therefore, there is no estate duty payable for most estates because several exemptions were available. Under the Singapore inheritance law, estate or holdings of a deceased individual encompassed everything enumerated under:

Estate law includes gifts passed on within the past five years before the death of the individual. It also consists of any assistance given throughout their life where the deceased person procured some interests.

Examples include collecting monthly rental from a gifted house or building that is still part of their estate. Another example would be if the late person procured benefits from assets held in trust, like bank accounts held in trust for a minor. All of these were liable to estate taxes before 15 February 2008.

Who is Liable for Inheritance Tax in Singapore?

The Estate Duty Act (EDA) was in charge of governing the Singapore inheritance tax. This tax was only relevant to those who passed away before the stated date (15 February 2008), as indicated under section 2A of the EDA.

Based on the Inheritance Tax law, one would need to pay the inheritance tax regardless of an existing will. However, if there is no will, the tax was to be given to the administrator of the liable individual.

How Is Inheritance Tax in Singapore Calculated?

As stated previously, the Singapore inheritance tax or estate duty was only applicable to deceased individuals who died before 15 February 2008. This tax was calculated according to whether the late individual had a residence in Singapore.

The law imposed this tax according to the determination of assets liable to Singapore inheritance tax by calculating the entire market value of these properties. Tax rates were then applied to the tax figure, excluding all relevant deductions. The interest amount was included where pertinent, and the final valuation was done accordingly.

Why was Inheritance Tax Abolished in Singapore?

Before abolition, this tax law was enacted to increase wealth redistribution among upcoming generations for the greater good of future societal development, improving social equity.

Primarily, the inheritance tax in Singapore was done away with because of the lack of impact concerning wealth generation through entrepreneurship, even with low initial capital. This is why the Singapore legal system finally scrapped the inheritance tax law in February of 2008.