The government has closed an existing loophole “arising from its periodic policy review.”
With effect on May 9, Additional Buyer’s Stamp Duty (ABSD) of 35% will apply on any transfer of residential property into a living trust, says the Ministry of Finance.
This comes less than half a year after the government’s most recent round of property market cooling measures out on Dec 15, where among others, ABSD has been raised to 17% from 12% for Singaporeans buying their second residential property.
Right now, when a residential property is transferred into a living trust, Buyer’s Stamp Duty (BSD) is payable.
ABSD may also be payable, depending on the profile of the beneficial owner(s) of the residential property transferred into the trust.
Where the living trust is structured such that there is no identifiable beneficial owner at the time when the residential property is transferred into the trust, ABSD currently does not apply.
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With this latest change, ABSD will be payable even if there is no identifiable beneficial owner at the time the residential property is transferred into a trust.
“ABSD aims to promote a stable and sustainable residential property market, and as such, it should apply to transfers of residential properties into all living trusts, irrespective of whether there are identifiable beneficial owners of the residential properties transferred into such trusts,” says MOF.
Under the new rules, this ABSD (Trust) is to be paid upfront, when the residential property is transferred into any living trust.
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However, as a concession, a trustee may apply to IRAS for a refund of ABSD (Trust), provided that the following conditions are met:
1/ All beneficial owners of the residential property are identifiable individuals
2/ Beneficial ownership of the residential property has vested in all of these beneficial owners at the time of property transfer into the trust.
3/ The beneficial ownership cannot be varied or revoked, or be subject to any condition subsequent, under the terms of the trust.
According to MOF, the refund amount will be based on the difference between the ABSD (Trust) rate of 35% and the ABSD rate corresponding to the profile of the beneficial owner with the highest applicable ABSD rate. The application for the refund must be made to IRAS within six months after the instrument is executed.
