Imposition of Stamp Duty on Sellers for Sale or Disposal of Residential Property

Prices of private residential units have been steadily increasing since the second half of 2009. To control the exuberance of the property market, the Government recently introduced a seller’s stamp duty (“SSD”). The objective of this measure is to curb short-term speculation that could cause the market to overheat. Additionally, the SSD could also prevent the formation of a property bubble.

Briefly, sellers of residential properties will have to pay SSD if their residential properties are acquired (or purchased) on or after 20 February 2010 and disposed of (or sold) within 1 year from the date of acquisition.

As an illustration, Seller (“S”) issued Option To Purchase (“OTP”) to Original Purchaser (“A”) on 10 February 2010. Next, A exercised OTP on 22 February 2010. Subsequently A issued OTP to Sub-Purchaser (“B”). B then exercised OTP on 25 May 2010. Here, A has to pay SSD because the property is acquired on or after 20 February 2010 and disposed of within 1 year from the date of acquisition. The computation of SSD payable is the same as the computation of buyer’s stamp duty.

The Inland Revenue Authority of Singapore (“IRAS”) has further clarified that an acquisition or disposal of properties includes the following modes of transfer:

a)    Direct sale or purchase;

b)    By way of a collective sale or purchase;

c)    By way of mortgagee sale;

d)    By way of gift, release, settlement or trust where the beneficial interest in the property passes to the beneficiary;

e)    By way of distribution in specie upon voluntary winding up of a company;

f)     By way of letter of authority; and

g)    By way of exchange.

However, certain transactions are exempted or remitted from SSD:

a)    A contract or transfer executed by a licensed housing developer where the sale of residential property is in accordance with the provisions of the Housing Developers (Control and Licensing) Act;

b)     A contract or transfer executed by a non-licensed housing developer lawfully carrying out the business of housing development;

c)    Subject to conditions, property passing on death of owner to persons who are beneficially entitled to the residential property, either by virtue of the Will or the laws of intestacy;

d)    A transfer by reason of land acquisition by the Government;

e)    Disposal upon the bankruptcy or involuntary winding up of the owner;

f)    Disposal by a foreigner as required under the Residential Properties Act;

g)    A transfer consequent to matrimonial proceedings (i.e. divorce) in which specific remission for buyer’s stamp duty has been granted to the transferee;

h)    A transfer made in consideration of marriage in which buyer’s stamp duty has been remitted for the transferee. SSD in excess of $10 will be remitted; and

i)    Transfer made pursuant to a scheme of reconstruction or amalgamation under Section 15 of the Stamp Duties Act in which relief for buyer’s stamp duty has been allowed to the transferee.

In view of the Government’s recent anti-speculation measure, it has become even more important to consider the Singapore tax implications when investing in Singapore property. Please feel free to contact us if you wish to speak to a tax advisor in this regard.