0.5% of private homes sold from 2018-2021 used 99:1 ownership arrangement allowing buyers to pay less tax
SINGAPORE — A "small but rising number" of private residential properties transacted involved a property purchase arrangement in which the ownership of a property is split in a 99:1 ratio, which would effectively reduce the additional buyer’s stamp duty (ABSD) needed, said Senior Minister of State for Finance and Transport Chee Hong Tat on Friday (April 21).
- About 0.5 per cent of private residential property transacted involved a loophole that allows homeowners to pay less tax
- Mr Chee Hong Tat, Senior Minister of State for Finance, was responding to parliamentary questions about an arrangement known as the 99-to-1 scheme
- The scheme works by selling a small percentage stake of a property to an existing homeowner with the ability to secure better financing
- This effectively reduces the Additional Buyer’s Stamp Duty owed
- People found to have entered into such schemes to escape the tax authority would have to pay back their dues, on top of an extra 50 per cent surcharge, Mr Chee said
SINGAPORE — A "small but rising number" of private residential properties transacted has a property purchase arrangement in which the ownership of a property is split in a 99:1 ratio, which would effectively reduce the Additional Buyer’s Stamp Duty (ABSD) needed.
Comprising about 0.5 per cent of all private property transactions from 2018 to 2021, such arrangements have “no significant impact” on the housing and mortgage market.
The figures were given on Friday (April 21) by Mr Chee Hong Tat, Senior Minister of State for Finance, in response to several parliamentary questions about such a scheme.
Questions filed by six Members of Parliament (MPs) referred to ongoing audits by the Inland Revenue Authority of Singapore (Iras), which is looking into instances where homeowners are involved in 99-to-1 arrangements, using the loophole to avoid paying taxes by reducing the ABSD levied on their property.
Mr Chee said that people found to have entered into such schemes to escape the taxman would have to pay back their dues, on top of an extra 50 per cent surcharge.
As for agents who promote or facilitate such tax avoidance, they will be referred to the relevant regulatory agency.
The questions were from Mr Murali Pillai, MP for Bukit Batok, and Ms Mariam Jaafar, MP for Sembawang Group Representation Constituency (GRC).
Mr Chee said: “In the case of property agents, which (MPs) asked, Iras will refer them to the Council for Estate Agencies (CEA) for investigation and disciplinary action in accordance with CEA’s code of ethics and professional client care.
“Depending on the severity of the breach, agents may face financial penalties and suspension of their registrations.”
With the 99-to-1 scheme, people sell a small percentage stake — 1 per cent or more — of the property to their spouse or immediate family members shortly after buying a property, in order to secure higher financing. However, some also do this to lower the ABSD levied on the property.
The ABSD rates now are 17 per cent of a property's purchase price when buying a second property for Singaporean buyers, and 25 per cent on subsequent purchases. Permanent residents and foreigners pay a higher ABSD.
Under the 99-to-1 scheme, homeowners buying multiple properties are able to pay less ABSD because it only applies on the small percentage stake transacted.
Mr Chee said that not everyone may have used the loophole to avoid tax, since it depends on the facts and circumstances surrounding each specific case. He did not elaborate.
Chua Chu Kang GRC MP Don Wee asked why it has taken the authority more than a decade to investigate since the ABSD was introduced in 2011.
In response, Mr Chee said that Iras adopts a "risk-based approach to detect and enforce against non-compliance tax avoidance”.
Ms Foo Mee Har of West Coast GRC also asked how much taxes had been avoided by property owners through this scheme. However, Mr Chee said that investigations are now ongoing and he is unable to provide that figure.
“Iras takes a firm stance against tax evasion and avoidance. The large majority of taxpayers are compliant and pay the taxes that are due,” he added.
Related topicsABSD Iras Chee Hong Tat property
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