No escape from ABSD with 35% tax on residential property transfer into a living trust
No escape from ABSD with 35% tax on residential property transfer into a living trust
May 13, 2022
SINGAPORE (EDGEPROP) - The Ministry of Finance (MOF) announced at 11.30pm on Sunday, May 8, that additional buyer’s stamp duty (ABSD) of 35% will apply to any transfer of residential property into a living trust with effect from May 9, the next day. It was like déjà vu as the latest round of property cooling measures were also announced minutes before midnight on Dec 15 last year.
The following evening on May 9, MOF announced that additional conveyance duties (ACD) will apply to transfers of equity interests in property-holding entities (PHEs) into trusts. Both ABSD and ACD will apply even if there is no identifiable beneficial owner at the time of the transfer into the trust.
A living trust is “a legal document or a trust, created during an individual’s lifetime (the trustor or grantor) where a designated person, for example the trustee, is given responsibility for managing that individual’s assets for the benefit of the eventual beneficiary,” says Norman Ho, senior partner, corporate real estate at Rajah & Tann Singapore. “It spells out how to distribute what’s in the trust after the original owner dies.”
At first glance, it would appear that the government is trying to plug a loophole in the acquisition of residential properties under such trust structures. “Some families purchase homes under trust structures for a variety of reasons, mainly driven to avoid ABSD or to pay lower ABSD rates legitimately,” says Karamjit Singh, CEO of Delasa, a real estate investment sales consultancy.
A plain vanilla trust structure involves a parent or grandparent buying a home for the benefit of a child or grandchild who could be a minor, explains Singh. “Because banks cannot lend to a minor (under the age of 21), the trustee would need to purchase in cash, and in effect, is irrevocably giving the sums of money to the beneficiary.”
These trusts are typically created for children under the age of 21 (minors) as they are probably not liable to pay ABSD if they are Singapore citizens and do not own a residential property, observes Lee Liat Yeang, senior partner at Dentons Rodyk’s corporate real estate practice group.
Read more at: https://www.edgeprop.sg/property-new...r-living-trust
