Seller’s stamp duty (“SSD”) changes with effect from 11 March 2017
Singapore Government has reduced the stamp duties that sellers have to pay on residential properties and slightly relaxed rules on loan thresholds, more than 3 years after the last round of property cooling measures and borrowing curbs that helped send private housing prices falling for 13 straight quarters.
Under the changes effective on 11 March 2017, the SSD will be payable if a homeowner sells his property within three years of purchase, down from four years previously. The SSD rates will also be lowered by 4 percentage points for each tier – to 4 per cent for properties sold in the third year; 8 per cent for those sold in the second year; and 12 per cent for those sold within the first year. The new SSD rates will apply to homes purchased from 11 March 2017 onwards.
Rules on the total debt servicing ratio (TDSR) framework will also be relaxed. The rules on the TDSR framework, which requires financial institutions to ensure loans they make do not push the borrower’s debt servicing ratio above 60 per cent of their gross monthly income, will be adjusted further in a move that will help some homeowners looking to monetize their properties. The Government said it will no longer apply the TDSR framework to mortgage equity withdrawal loans with loan-to-value ratios of 50 per cent and below.
Stamp Duty: Additional Conveyance Duties on Residential Property-Holding Entities
A Bill has been passed in Parliament that will see residential property transactions that involve the transfer of the equity interest rather than the direct purchase of property being subject to higher stamp duty. The law will take effect on 11 March 2017.
The move by the Singapore Government is meant to align the stamp duty levied on residential property transactions through transferring the equity interest in the entity that owns the properties with the rate levied on direct property transactions.
Currently, a direct purchase of residential property incurs buyer’s stamp duty of 3 per cent. Depending on the buyer’s citizenship, up to 15 per cent additional buyer’s stamp duty (ABSD) is imposed.
But the buying of shares in a firm which owns the property incurs a share duty tax of only 0.2 per cent of the firm’s net asset value.
Now significant owners of residential property-holding entities (PHEs) will be subject to equivalent stamp duties when they transfer the shares as when they buy or sell the properties directly.
A significant owner of a PHE refers to a person or entity who beneficially owns at least 50% equity interest or voting power in a PHE either on its own or with its associates.
The Government will introduce a new additional conveyance duty (ACD) for the buyer which comprises a flat 15 per cent levy on the value of the underlying residential properties, and a 1 to 3 per cent levy that is intended to mirror the buyer’s stamp duty.
For the seller, an ACD of a flat 12 per cent on the value of the underlying residential properties will apply. The ACD will be pro-rated based on the percentage of equity interest acquired or disposed of.
For more details, you may refer to IRAS website.