05/05/23

SINGAPORE: Government doubles property stamp duty surcharge for foreign investors and corporates.

As published on step.org/industry-news, Thursday 4 May, 2023.

Singapore's government has doubled the additional buyer's stamp duty (ABSD) rates with immediate effect.

A statement from the Minister of National Development said the increase is a 'pre-emptive measure to dampen local and foreign investment demand for residential property'. Further, he noted, it prioritises Singapore citizens' ability to acquire homes for owner-occupation. Similar measures were introduced from 16 December 2021 and 30 September 2022 respectively, but as property prices have showed renewed signs of acceleration in the first quarter of 2023 the new measures go much further.

The ABSD rate has been doubled from 30 to 60 per cent for any residential property purchase by foreigners, including foreign corporations that are not housing developers. The rate of ABSD for trustees acquiring residential properties was increased from 35 to 65 per cent in May 2022. Trust purchasers could seek a refund where the residential property is held on trust for identifiable individual beneficiaries and remission conditions are satisfied, says law firm Withersworldwide. However, the firm notes that this could create a cash-flow issue and add to the financing costs and burden on the purchaser who is borrowing to finance the acquisition.

The duty has also been raised by 3 to 5 per cent for Singapore citizens' and permanent residents' purchase of their second and third residential properties.

The ABSD rate charged will be determined by a combination of aspects of the buyer's profile at the date of acquisition. These include whether the buyer is an individual or an entity and whether they are a Singapore citizen, permanent resident there or foreigner. It also takes into account the number of residential properties owned by the buyer, including residential property beneficially owned and held in trust but excluding all residential properties located outside Singapore, and whether the residential property is to be held in a living trust.

There are transitional exemptions for buyers who signed options to purchase before the new rates come into force. No further concessions will be made, says the Singapore Inland Revenue Authority. It warned that it has the power to counteract tax avoidance arrangements under the Stamp Duties Act, and impose a 50 per cent surcharge on the additional duty payable. Recent reports have suggested that the authority had sought to audit certain property purchase arrangements that have been entered into with the possible intention of avoiding ABSD.

Singapore's free trade agreements with the European Free Trade Association and the US mean that nationals and permanent residents of Iceland, Liechtenstein, Norway or Switzerland, as well as US nationals, are entitled to acquire Singapore residential property at the same stamp duty rate as Singapore citizens.

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