Stamp duty traps to watch out for

ON Dec 15, 2021, the Ministry of Finance introduced a new package of measures designed to cool the residential property market. The measures include increases in Additional Buyer's Stamp Duty (ABSD), the tightening of the Total Debt Servicing Ratio, adjustments to the Loan to Valuation limit for loans from HDB and a planned increase of housing supply.

Notably, there were significant increases in the ABSD rates applicable to almost all categories of buyers. The ABSD rates remained unchanged only for Singapore citizens and permanent residents purchasing their first residential property (0 per cent and 5 per cent respectively). This article focuses on the implications of the increase in ABSD rates arising from the property cooling measures.

Most of the ABSD rates increased by 5-15 per cent, with the highest rate of about 44 per cent applying to buyers who purchase equity interests in property-holding entities (PHEs) (viz shares in companies owning residential properties) under the Additional Conveyance Duty (ACD) regime. (The ACD regime was introduced to ensure that buyers do not take advantage of the lower stamp duty on purchases of shares as opposed to residential properties by buying the shares of the company owning the property rather than the property itself.)