99:1 purchase ABSD

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THE Inland Revenue Authority of Singapore (Iras) has discovered 166 cases of private property purchases that involved tax avoidance as at April 2024, and about S$60 million in Additional Buyer’s Stamp Duty (ABSD) and surcharges will be clawed back.

https://businesstimes.com.sg/singapo...ole-avoid-absd

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https://www.channelnewsasia.com/sing...p-duty-3395916

99-to-1 property scheme: IRAS conducting regular audits to uncover 'contrived or artificial' arrangements

SINGAPORE: Audits of a property purchase arrangement – commonly known as a 99-to-1 scheme – are part of regular checks by Singapore's tax authority to uncover "contrived or artificial" setups that home buyers use to avoid paying tax or stamp duties.

The ongoing probe, which looks into arrangements where the ownership of a property is split in a 99:1 ratio, also covers those where the second owner has a share greater than 1 per cent, said the Inland Revenue Authority of Singapore (IRAS) on Thursday (Apr 6) in response to CNA's queries.

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What is ABSD and how does the 99-to-1 scheme work?
The government introduced ABSD as a tax in 2011 to manage demand for property. Singaporeans must pay 17 per cent in ABSD when purchasing a second property, and 25 per cent on subsequent purchases.

Those figures are higher for permanent residents and foreigners.

ABSD is computed "on the purchase price as stated in the dutiable document or the market value of the property", whichever is the higher amount, according to the IRAS website.

There are two ways to buy property in Singapore when there are two owners: One would be joint tenancy, which is commonly used by couples, where both parties will have an equal share of the property.

The second way would be tenancy-in-common, which is commonly used for investment properties. Under this structure, the co-owners own a specific number of shares in the property and this could be split in any ratio, such as 80 to 20.

IRAS is looking into the second way – private property buyers who have entered into split agreements with the possible intention of avoiding ABSD.

If the 99-to-1 intention is declared at the outset, the ABSD is payable as long as one party is an existing property owner.

What IRAS is looking out for are cases of possible tax avoidance by buyers who have entered into a 99-to-1 scheme in which the 1 per cent stake is sold immediately after the purchase option is exercised.

Using such an arrangement, where the 1 per cent stake is sold in the second stage, as an example:

A person who owns a residential property buys a second. This means he is liable to pay ABSD of 17 per cent.

If the property costs S$1 million (US$752,000) and he buys 1 per cent of this, his share of the property is S$10,000. Therefore, he has to pay 17 per cent of S$10,000 – that is, S$1,700 – as ABSD.

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