Govt to amend ABSD rules to include share transfer

National Development Minister Lawrence Wong has urged valuers in Asean countries, including stakeholders in the real estate industry, to embrace digital innovations...

National Development Minister Lawrence Wong announced plans to plug ABSD loophole. Source: Wikimedia Commons

The authorities are planning to amend the rules to plug a loophole that allows some companies to avoid paying Additional Buyers Stamp Duty (ABSD), by acquiring shares in a company that owns the property, rather than buying the property outright, reported the Straits Times.

“In principle, we should treat transactions in residential property on the same basis, regardless of whether a property is transferred directly or through a transfer of shares in a company whose primary business is in residential property in Singapore,” said National Development Minister Lawrence Wong in reply to a proposal from MP Yee Chia Hsing during a parliamentary session yesterday (8 March).

Previously, several large transactions made headlines for using this method to lower their tax bill. In January, Veteran banker Wee Cho Yaw purchased 45 remaining units at The Nassim, a luxury condominium, by acquiring the entire stake of Nassim Hill Realty for S$411.6 million.

Last July, CDL bought its joint venture partner’s (Wing Tai Holdings) interest in Summervale Properties, which owns the Nouvel 18. It subsequently disposed the condo via a S$977.6 million profit participation securities platform.

Meanwhile, Edmund Tie and Co’s Research Head for Southeast Asia, Dr Lee Nai Jia, believes that the move would negatively affect property developers with many remaining unsold residential units.

“Developers will have to consider… the costs of each option, including share transfer, giving discounts or paying the extension and ABSD charges while waiting for the market to improve.”

But if this loophole isn’t plugged, more home buyers could take advantage of it, he added.

At present, Singapore citizens buying their first house are exempt from ABSD, but they need to pay a stamp duty of seven percent and 10 percent for their second and subsequent purchases, respectively.

Permanent residents are required to pay five percent for their first flat and 10 percent for the succeeding ones, while foreigners and corporate entities are obliged to fork out an ABSD of 15 percent for all purchases.

However, if the residential property was acquired via the purchase of stocks or shares of a holding firm, the transaction only incurs a tax based on 0.2 percent of the company’s net asset value.

This article was edited by Chang Hui Chew.