0.5% of private residential property sales involve 99-to-1 or similar deals: Chee Hong Tat

Apr 21, 2023

BETWEEN 2018 and 2021, 0.5 per cent of private residential properties transacted - or one in 200 sales - involved so-called 99-to-1 or similar arrangements, said Senior Minister of State for Finance Chee Hong Tat on Friday (Apr 20).

By structuring the transaction in this manner, the parties involved have effectively reduced the additional buyer’s stamp duty (ABSD) on the purchase of the property, the minister added.

Chee was responding in Parliament to multiple questions posed by MPs on the 99-to-1 arrangement, under which first-time buyers purchase a residential property in their name, and then – within a very short period of time – sell a 1 per cent interest to another individual. The arrangement enables a person who already owns private property to have a related party front the purchase of an additional property.

Chee said that the Inland Revenue Authority of Singapore (Iras) had detected a “small but rising” number of 99-to-1 arrangements in recent years. Buyers are typically spouses or other immediate family members with a higher ABSD profile, but with the ability to secure financing for the property, he pointed out.

Chee’s response follows Iras’ announcement on Apr 6 that it was investigating property transactions to uncover cases of avoidance of stamp duty tax.

On Friday, Chee noted that 99-to-1 arrangements make up a “very small” proportion of the overall residential property market transactions, without providing absolute figures. He said that the impact of such deals on the residential and mortgage markets in Singapore is “not significant”.

Urban Redevelopment Authority data shows that 95,755 private homes were sold (excluding executive condominiums) between 2018 and 2021. So 0.5 per cent of that total would amount to 479 units sold under 99-to-1 deals, said Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie.

ABSD was introduced in December 2011, with a 3 per cent duty imposed on Singaporeans’ purchase of third and subsequent properties, as one of several property market cooling measures. Permanent residents buying a second or subsequent residential unit had to pay ABSD of 3 per cent, and 10 per cent ABSD applied for every residential property purchased by foreigners.

Rates were hiked in 2013, 2018 and 2021. A Singapore citizen now pays 17 per cent on buying a second residential property, and 25 per cent on third and subsequent homes. Foreigners buying any residential property in Singapore pay 30 per cent ABSD.

On Friday, Chee said that whether a 99-to-1 arrangement involves tax avoidance depends on the facts and circumstances of the specific case.

If Iras determines that tax avoidance has occurred, it will recover the rightful amount of stamp duty from the buyers, and may impose a 50 per cent surcharge on the ABSD payable.

In response to a question on the number of such transactions considered “bona fide” and those which constitute tax avoidance, Chee said that he was unable to reveal details as investigations are ongoing.

He also said that it was too early to provide the estimated total amount of tax that Iras should have collected. However, taxpayers who wish to come forward voluntarily to disclose that they have not paid the rightful amount of ABSD may do so, said Chee. And if they do, “Iras will look at the case more favourably”.

He stressed that the government takes a serious view against individuals who facilitate tax avoidance, when asked how property agents who promote 99-to-1 arrangements will be penalised. According to Chee, Iras will refer these agents to the Council for Estate Agencies for investigation and disciplinary action; agents may face financial penalties or be suspended.

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