Tips for Reducing Expenses on Stamp Duty When You Own Multiple Properties

Stamp Duty

Stamp duty, particularly Additional Buyer’s Stamp Duty (ABSD), has been a pivotal tool in Singapore’s real estate market since its inception in 2011. As property prices fluctuate, understanding stamp duty becomes imperative, especially for those considering owning multiple properties. Let’s delve into comprehending stamp duty and explore strategies to minimize costs effectively.

Buyer’s Stamp Duty (BSD) Basics

When purchasing a residential property in Singapore, Buyer’s Stamp Duty (BSD) is a mandatory tax. For subsequent property acquisitions, Additional Buyer’s Stamp Duty (ABSD) is levied in addition to BSD. BSD is a progressive tax, meaning the rate increases with the property’s value.

For instance:

– For the first $180,000: 1%

– Next $180,000: 2%

– Subsequent tiers up to 6% for remaining amounts.

Purchase Price or Market Value of Residential Property
Buyer’s Stamp Duty (BSD)
First $180,000
1%
Next $180,000
2%
Next $640,000
3%
Next $500,000
4%
Next $1.5 million
5%
Remaining amount
6%

Thus, buying a $1 million home incurs a BSD of $24,600, while a $4 million property attracts $179,600, illustrating the progressive nature of BSD.

How much does the Additional Buyer’s Stamp Duty (ABSD) amount to in Singapore? 

If you’re purchasing a second or subsequent residential property, you’ll be required to pay ABSD. Unlike the Buyer’s Stamp Duty (BSD), which is calculated based on the property’s incremental value, ABSD imposes a flat rate on the entire purchase price, depending on the buyer’s profile.

Profile of the Buyer
Additional Buyer’s Stamp Duty (ABSD)
[FROM 16 December 2021 TO 26 April 2023]
Additional Buyer’s Stamp Duty (ABSD)
[FROM 27 April 2023]
Singapore Citizens
Singapore Citizen buying 1st residential property
No ABSD
No ABSD
(no change)
Singapore Citizen buying 2nd residential property
17%
20%
(increase of 3%-points)
Singapore Citizen buying 3rd and subsequent residential property
25%
30%
(increase of 5%-points)
Singapore Permanent Residents
Singapore Permanent Resident buying 1st residential property
5%
5%
(no change)
Singapore Permanent Resident buying 2nd residential property
25%
30%
(increase of 5%-points)
Singapore Permanent Resident buying 3rd and subsequent residential property
30%
35%
(an increase of 5%-points)
Foreigners
Foreigners buying any residential property
30%
60%
(increase of 30%-points)
Entities
Entities buying any residential property
35% + Additional 5% for Housing Developers
65%
(increase of 30%-points)Housing Developers: 35% + Additional 5% for Housing Developers(no change)

stamp duty singapore

Housing developers may apply for remission of the ABSD rate, excluding the additional 5% they pay.

For Singapore Citizens, the ABSD scenario is as follows: there’s no ABSD for the first private residential property purchase. However, for subsequent purchases, there’s a 20% ABSD for the second property and 30% for the third and any subsequent residential property acquisitions.

Singapore Permanent Residents (PRs) face a different ABSD structure. They start paying ABSD from their first private residential property purchase, at a rate of 5%. Subsequently, they’re subjected to a 30% ABSD for their second property and 35% for any subsequent residential property purchases.

Foreigners encounter a significant ABSD burden, starting at 60% from their first residential property purchase. This hefty price tag underscores the substantial financial commitment required for foreigners to own a home in Singapore.

Understanding ABSD

ABSD is a flat rate imposed on the entire property’s purchase price, varying according to the buyer’s profile. The rates were revised on April 27, 2023, reflecting the government’s efforts to regulate property ownership. Different rates apply to Singapore Citizens, Permanent Residents, Foreigners, and Entities.

For example:

– Singapore Citizens face no ABSD for their first property but encounter 20% and 30% for subsequent purchases.

– Permanent Residents start at 5% for the first property, escalating to 30% and 35% for subsequent ones.

– Foreigners endure a substantial 60% ABSD from the first property onwards.

 

Tips to Minimize Stamp Duty Costs

Certainly, let’s elaborate on each tip line by line:

Utilize CPF OA Balances: When purchasing a property, the Additional Buyer’s Stamp Duty (ABSD) often necessitates a cash payment upfront. However, Singaporeans can leverage their Central Provident Fund Ordinary Account (CPF OA) balances to offset this cost. While this doesn’t eliminate the ABSD, it allows for reimbursement post-purchase. Nonetheless, it’s essential to note that CPF balances may not always cover the entire ABSD amount, particularly for subsequent property investments.

Sell Before Buying: Timing is crucial in navigating Singapore’s property market. Selling an existing property before purchasing another one can unlock significant benefits in terms of ABSD remission. This is especially advantageous for married couples and individuals over 55, who qualify for remission upon right-sizing their properties. However, it’s vital to plan meticulously to avoid liquidity gaps between property transactions.

Decoupling: Decoupling involves removing a spouse’s name from a property, allowing each partner to own one property individually without incurring ABSD. This strategy is particularly appealing for couples aiming to hold multiple properties separately. However, decoupling requires careful financial planning and legal considerations, including the repayment of CPF monies and legal fees. It’s crucial to evaluate the long-term implications and eligibility criteria before proceeding with decoupling.

Leverage ABSD Remission: Married couples and eligible singles can explore ABSD remission options to reduce the financial burden associated with property acquisitions. By applying for remission, couples with at least one Singapore Citizen spouse or individuals over 55 can mitigate ABSD costs significantly. This strategy aligns with the government’s efforts to support homeownership and property rights. However, it’s essential to meet the eligibility criteria and adhere to the application process meticulously.

Explore Foreign National Privileges: Nationals from specific countries enjoy privileges akin to Singapore Citizens concerning ABSD remission. By exploring citizenship or residency changes, individuals may unlock opportunities to invest in Singapore’s property market without incurring hefty ABSD charges. However, such decisions entail thorough consideration of personal circumstances, including tax implications and residency requirements. It’s advisable to seek professional advice before pursuing changes in citizenship or residency status.

These strategies offer viable avenues for minimizing stamp duty costs and optimizing property investments in Singapore. By understanding the nuances of stamp duty regulations and leveraging available options, investors can navigate the market effectively while maximizing returns on their investments.

Alternative Investment Avenues

Investors seeking to diversify without ABSD constraints can explore commercial properties, industrial estates, or Real Estate Investment Trusts (REITs). Additionally, offshore property investments via platforms like BigFundr and RealVantage offer attractive opportunities without ABSD implications.

In conclusion, navigating Singapore’s stamp duty landscape requires meticulous planning and awareness of available strategies. Understanding the nuances of stamp duty and implementing effective cost-minimization techniques can optimize investment outcomes while complying with regulatory obligations.

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