35% Additional Buyer’s Stamp Duty (ABSD) On Transfer of Residential Property Into All Living Trusts – What Does This Mean for Us?
With the Additional Buyer's Stamp Duty (ABSD) now applying to all trustees, does this new rule bring about a significant impact for the market and does it actually affect us?
The Ministry of Finance announced that additional buyer’s stamp duty of 35% will now apply to any transfer of residential property into all living trusts, with effect from 9 May 2022.
Trustees Now Hit With 35% ABSD
Buyer’s Stamp Duty (BSD) is a fee that is applicable to any transfer of residential property into a living trust. Whether ABSD is payable on top of BSD, however, depends on a number of factors, such as the profile of the buyer. Currently, ABSD does not apply to living trusts without an identifiable beneficial owner at the time the residential property is transferred into the trust.
However, with effect from 9 May 2022, ABSD will apply to all transfers of residential properties into all living trusts, even those without an identifiable beneficial owner at the time the residential property is transferred into a trust.
What Do BSD, ABSD and Living Trusts Mean?
Let us first explain some of the fundamental keywords involved in the newest update of ABSD measures.
Buyer’s Stamp Duty (BSD) is a levied tax on every home buyer. Whenever you purchase a property, BSD is always payable. It is computed based on the property price, so the higher the price of your new home, the higher BSD you would have to pay.
Additional Buyer’s Stamp Duty (ABSD) is also a levied tax which applies to the higher of a property’s purchase price or market value. It was introduced in 2011 as a property cooling measure by pushing prices upwards to moderate property demand. The purpose of this tax is to ensure that residential prices remain affordable for Singaporeans. It is levied on top of BSD and is only applicable to buyers who fit certain criteria, some of which include residential status and number of properties owned.
What does it mean to purchase residential properties under a living trust? A living trust refers to a legal document created by a person during his or her lifetime, stating that the designated trustee, usually himself or herself, would be responsible for managing the wealth and assets of a designated beneficiary, usually a kin of the trustee. Placing the property in the living trust means that the property is moved into the ownership of the living trust. However, the trustee can still control the property and the trust.
Purpose of the Implementation of This Change
Why this change in the ABSD measure applying to all living trusts? The Ministry of Finance (MOF) has expressed that the closure of this gap and loophole would help to promote a stable and sustainable residential property market in Singapore.
With the ABSD now applicable to all living trusts, buyers who circumvented the ABSD by purchasing residential properties for unidentifiable beneficiaries via trusts which are conditional and revocable, can now be prevented from practicing as such.
Hence, the implementation of the ABSD on all living trusts would act as a moderator to the high housing demand in Singapore, due to its impact on residential prices. As this is a cooling measure, it would help to curb the surging prices and lead to a more sustainable residential property market in Singapore in the long run. This is done in the hope that more Singaporeans would have greater access to and be able to afford a residence.
As property prices still follow a rising trend, the implementation of such a cooling measure would also help to maintain reasonable residential prices for all Singaporeans.
Availability of a Refund on the ABSD (Trust)
Fret not if this update to the ABSD regulations has affected you. There is still opportunity for concession, by applying for a refund to the Inland Revenue Authority of Singapore (IRAS).
Any conveyance, assignment or transfer on sale of residential property to a trustee will be subject to the ABSD (Trust) rate of 35%. However, one may apply for a Remission of ABSD (Trust) and get a refund, if all beneficial owners of the residential property are identifiable individuals and that beneficial ownership of the residential property has vested in all of these beneficial owners at the time of property transfer into the trust. The beneficial ownership cannot be revoked, varied or subject to subsequent conditions.
Here is what you have to do if you are planning to apply for the Remission of ABSD (Trust).
- Pay the ABSD (Trust) of 35% upfront upon making the purchase of a residential property into the living trust.
- Apply for a refund to IRAS within 6 months after the date of execution of the instrument.
The amount of remission received would be based on the difference between the ABSD (Trust) rate of 35% and ABSD rate corresponding to the profile of the beneficial owner with the highest applicable ABSD rate.
For more information on the remission conditions and whether you qualify for it, please refer to the page here.
What Would a Liable Buyer Need to Do?
If you are liable for this payment of ABSD on your transfer of residential property into any living trust, you would be required to pay the ABSD (Trust) upfront, when the residential property is being transferred into any living trust.
ABSD would be payable on top of the existing Buyer’s Stamp Duty.
Will I Be Affected by This?
The biggest question you may have regarding this latest update may be – does this affect me? The short answer is, unlikely not. As illustrated in the figure below, between December 2021 and the news released on 9 May 2022, there is no change in ABSD rates for all the below groups of buyers, with the only exception being Trustees.
Noting that residential properties bought under trusts have to be funded solely by cash, the new rule will likely bring about an impact only to a very small target market in Singapore.
| Buyer Profile | ABSD Rates on and after 16 Dec 2021 | ABSD Rates on and after 9 May 2022 | |
|---|---|---|---|
| Singapore Citizen | Buying 1st Residential Property | N/A | N/A |
| Buying 2nd Residential Property | 17% | 17% | |
| Buying 3rd Residential Property | 25% | 25% | |
| Singapore PR | Buying 1st Residential Property | 5% | 5% |
| Buying 2nd Residential Property | 25% | 25% | |
| Buying 3rd Residential Property | 30% | 30% | |
| Foreigners | Buying any Residential Property | 30% | 30% |
| Entities | Buying any Residential Property | 35% | 35% |
| Housing Developers | Buying any Residential Property | 35% (+ 5% non-remittable) | 35% (+ 5% non-remittable) |
| Trustee | Buying any Residential Property | N/A | 35% |
Helping You to Better Finance Your Newest Property
That being said, those who choose to make a purchase and transfer of residential properties into a living trust may be looking for ways to manage their property financing better.
With the 35% ABSD being levied, there is an increase in price which trustees purchasing properties have to cope with. As property prices continue to be on the rise in Singapore, this is only a sign that land and property are still doing very well. Home loans are also becoming more common in the midst of ever-increasing prices. To know more about home loans and find out which one is the most affordable and most suitable for you, check out our top picks on home loans in Singapore in 2022.
We have curated a list of home loans and compared between the different types of loans, such as HDB loans and bank mortgage loans for you to take your pick
DBS Private Home Loan
HSBC Home Loan
Don’t Buy, Refurbish
Want a change in scenery and a brand new home but can’t afford it? Well, there is always the choice to renovate your home instead of buying a new one! A well-done renovation could make your home feel as good as new, with a much smaller pinch to the wallet than a brand new purchase. Spruce up your home now and come home to a refreshed place you can call your own, without worrying too much about the costs, with our compilation of the best renovation loans in Singapore.
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Fiona is a full-stack marketer working in the digital sphere for more than six years.
A self-proclaimed foodie and bargain hunter, she wants to bring the best deals and value to the community around the world. When not working on her pet projects, Fiona can be found sipping a coffee while reading a paperbacks or watching mystery thrillers on Netflix and Disney+.