Government Plan To Fix The Stamp Duty Loophole
The Singapore Government has recently announced its plan to make legislative changes in order to patch up the controversial loophole in the law, which has led to property developers taking advantage of the system to avoid paying usual stamp duty charges. Minster For National Development, Lawrence Wong, announced this proposal to Parliament on March 7 2017.
A current loophole in the law means that property buyers are able to sidestep stamp duty charges. Rather than purchasing the property directly, they are buying shares of a holding company to evade paying the Additional Buyers Stamp Duty.
Under the current rules, residents in Singapore are required by the law to pay a stamp duty of three per cent for residential properties purchased directly. Depending on your nationality and if you are a foreign resident or corporate entity, you can be subject to higher charges with Additional Buyers Stamp Duty of up to 15 per cent on all properties. However, the loophole in the law exists through the purchase of property via stocks or shares of a holding company; this means that property buyers would only be paying a tax of 0.2 per cent of that company’s net asset value without any stamp duty. This crack left by the legislation has led to bulk purchases of Singapore condominium units by property developers who are looking to lower their tax bill.
The inadequacy of the law as long been criticized and despite the Government previously denying they would do anything about the loophole, they have u-turned on their position to bring about change in legislation. This comes after highly publicized deals by buyers exploiting the loophole and avoiding paying higher rates have made the headlines. It is these bulk purchases of residential property units, which are believed to have triggered the sudden change of heart by the Government.
An example of the loophole in action and why the Government wants to put a stop to it, can be seen in the extravagant $411.60 million deal made by banker, Wee Cho Yaw in January 2017. He bought the last 45 luxury new launch condo units at The Nassim by acquiring the holding company, Nassim Hill Reality.
While this announcement to change the law has been praised for subjecting future property buyers to the usual stamp duties, analysts also highlight the issues that legislative changes could have on the property market. The concern is that if Additional Buyers Stamp Duty is enforced on all buyers, it could cause instability in the market, especially with high-end properties where the demand for units stays relatively low. This may also have a negative affect on property developers who can be left with hundreds of unsold units until the market improves.
Although the Government has announced its plan to plug the legal loophole for buyers and to bring it into line with regular property charges, it is yet to be made clear how exactly it will be amended or when the changes will come into force.
The Nassim is a freehold condo located at prime district 10. Below are a lists of new launches that are nearby
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