Buying a second property will incur Singaporean investors 7% Additional Buyer’s Stamp Duty, to 10% for third and subsequent homes. Here are some legal loopholes, to avoid paying that hefty sum.
As if properties in Singapore are not already crazily expensive, buyers must also shell out a pretty penny in stamp duty. In Singapore, all property purchases are charged Buyer’s Stamp Duty (BSD), calculated at 1% on the first $180,000, 2% on the second $180,000, and 3% on the rest of the property’s cost. But in December 2011, the Government implemented the Additional Buyer’s Stamp Duty (ABSD), one of several cooling measures used to curb property speculation.
In January 2013, hot on the heels of a feverish market that saw exploding property prices, the Government upped the stakes again. Singaporeans are now taxed 7% ABSD on the second property and 10% on the third and subsequent properties. Singapore Permanent Residents (PR) are taxed 5% for their first property and 10% on their second and subsequent properties. Foreigners pay a flat 15% ABSD for any property they purchase. If two parties are of mixed residency status or mixed residential ownership profile, the Government will charge you the higher ABSD rate. Want to skimp on the ABSD? Try these.
1 PURCHASE YOUR FIRST HOME UNDER ONLY ONE SPOUSE’S NAME
How it works
This requires some planning. If you intend to buy a HDB flat, it can be bought only under the Single’s Scheme after one party turns 35, leaving your spouse’s name free to buy a private property. Otherwise, both spouses should buy separate private properties under your respective names. This is a useful solution for the many newly minted “en bloc millionaires” who may be contemplating buying two properties – one to stay in and the other to lease out.
Obviously, you need enough money – or earn enough to get a sufficient loan – to support the purchase of a property by yourself. Based on one person’s salary instead of two, this may restrict the loan quantum the bank is willing to extend to you, hence denting your budget.
How it works
You don’t actually need to divorce your partner to avoid paying ABSD. Decoupling means transferring the ownership of a property from one co-owner to the other. You can either sell your share to your partner, or by way of gift. If it’s a gift, note that you cannot have outstanding loans. All CPF and accrued interest of the existing party must be refunded. If you purchase your spouse’s share at market value, you take over the existing bank loan if any, and refund your spouse’s CPF with accrued interest.
Firstly, married couples who own HDB flats are not allowed to decouple. You can, however, use the resale partshare method to transfer flat ownership between parents and children, or to buy over your ex-spouse’s share. Secondly, though the idea is for both spouses to “share” two homes, who gets to legally own the more expensive house? Even if you’ve owned the property for many years, you start all over and the party who takes over the share of the other spouse is subject to Seller’s Stamp Duty for that share, if the property is sold within the first three years of the transfer.
3 BUYING THROUGH A TRUST
How it works
This is usually done by parents for their children who are below 21 years old and do not have the legal capacity to own a property in his/her own name yet. The parents set up a trust to purchase a property for the child (the beneficial owner). Pacific Law Corporation charges about $5,000.
“If a property is purchased under a trust, it belongs to the beneficiary and the trustee is accountable to the beneficiary for the property,” highlights lawyer Elena Tay, the executive director of Pacific Law Corporation. This means the trustee must manage the trust property, such as paying the relevant taxes and duties for the benefit of the child.
Also, such purchases must be done in hard cash. “The trustee is unlikely to get a bank loan for the purchase of the property,” says Elena.
good to know
Singaporeans are now taxed 7% ABSD on the second property and 10% on the third and subsequent properties.
text STELLA THNG illustration KAFFY TAN
Singaporeans are now taxed 7 per cent ABSD on the second property and 10 per cent on the third and subsequent properties.
BUYING A $1-MILLION INVES TMENT PROPERTY WITHOUT DEC OUPLING
How it works
BSD $1,800 (1% of first $180,000) + $3,600 (2% of next $180,000) + $19,200 (3% of remaining $640,000) = $24,600
ABSD 7% x $1 million = $70,000
Total $24,600 + $70,000 = $94,600
BUYING AFTER DEC OUPLING
If the couple co-owns the first property at 50%-50%, the husband buys over the wife’s share ($500,000) and they pay:
Husband’s BSD $1,800 (1% of first $180,000) + $3,600 (2% of next $180,000) + $4,200 (3% of remaining $140,000) = $9,600
Wife buys the $1-million investment property, counted as her first property. She pays:
Wife’s BSD $1,800 (1% of first $180,000) + $3,600 (2% of next $180,000) + $19,200 (3% of remaining $640,000) = $24,600
Total BSD paid for both properties $9,600 + $24,600 = $34,200
“Decoupling means transferring the ownership of a property from one co-owner to the other.”
Home & Decor’s property columnist since 2011, Stella is a polytechnic lecturer-cum-writer with over 25 years of experience in publishing. She bought her first home at 23 and loves sniffing out good property investment deals.
the expert says
No matter if you are buying your second (or subsequent) property alone or with your spouse, ABSD will depend on residency status, the number of residential properties owned, as well as nationality. A Singaporean man with a foreign wife, for example, will have to pay 15% on the second property purchased together. A first-time buyer coinvesting with his mother who already owns one home will have to pay 7% ABSD as his mother’s property status will be taken into account, and her home is counted as the second property.