The aim of the tax, introduced on May 9, 2022, is to close a gap in previous stamp duty rules. Under these rules, ordinary buyer stamp duty (BSD) was payable on the transfer of residential property to a "lifetime trust", and additional buyer stamp duty (ABSD) was also payable, depending on the profile of the beneficial owners of the residential property transferred to the trust. However, suppose the structure of a lifetime trust is set up with no identifiable beneficial owner when the residential property was transferred to the trust. In that case, ABSD is not applicable, so the ABSD treatment for a residential property transfer would be the same whether it was done with the participation of the trust or not.
The new law states that an ABSD of 35% must now be paid in advance in such a case. However, a tax refund is possible if the sale of residential property is to a trustee who holds the assets of one or more identifiable beneficiaries in the trust. Testamentary trusts are also exempt from tax.
The law is not retroactive and only applies to transactions entered on or after May 9, 2022. However, it is unclear what would happen if the trustee of a pre-existing trust subsequently assigned the assets to an identifiable beneficiary or distributed them to any identifiable beneficiary. According to the law firm Withersworldwide, Singapore's tax authorities may treat any related transactions as taxable.
The ABSD rate paid will vary depending on the recipient's profile: whether they are individuals or businesses, their citizenship or permanent resident status in Singapore, and the amount of Singapore residential property they already own. It is levied in addition to the buyer's standard 4% stamp duty on residential property purchases.
At the same time, Singapore also introduced an Additional Conveyance Duty (ACD) for trusts and a new stamp duty regime for waiving the share of residential property held in trust, effective May 10, 2022. The ACD applies when the significant ownership limit has been exceeded, but there is currently no identifiable beneficial owner of such interests.
“The update to the ABSD regime is in line with the Singapore government’s policy on taxing real estate wealth,” Withersworldwide said in a statement. “It follows the previous measures to increase the ABSD rate taken in December 2021, as well as an increase in property tax rates in the 2022 budget.”
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