42 firms granted reprieve from Qualifying Certificate rules since February last year
With further tweaks to the criteria for exemption announced on June 29, some companies not exempted previously are re-applying
Singapore
FORTY TWO companies have been exempted from the Qualifying Certificate (QC) regime since the new framework was first introduced in February last year, while the latest refinements to the criteria for exemption could allow for some additional firms to qualify as well.
Companies exempted (as at June 28, 2021) include listed developers such as CapitaLand, Oxley Holdings, Roxy-Pacific Holdings, Heeton Holdings and Koh Brothers.
Meanwhile, following feedback, further tweaks to the criteria for exemption were announced on June 29, 2021, by the Ministry of Law (MinLaw) and the Singapore Land Authority (SLA).
In response to queries from The Business Times, a spokesperson for MinLaw said that the Ministry and SLA are processing applications under the adjusted exemption criteria.
Norman Ho, senior partner at Rajah & Tann, said of the two latest refinements: "It draws the perimeters and gives more certainty to developers to know they are likely able to qualify when they apply. There are companies that were not exempted previously but are re-applying."
Under the Residential Property Act (RPA) - which seeks to ensure housing developers do not hoard and speculate in residential land - any housing developer not considered a Singapore company has to apply for a QC when it acquires residential land for development, other than from the government. A housing developer which is a Singapore company is not subject to the QC regime.
But a publicly-listed housing developer that is essentially Singaporean was not considered a Singapore company as long as they have a single foreign shareholder, going by the RPA. The RPA defines a Singapore company as a Singapore incorporated one where all directors and shareholders are Singapore citizens or Singapore companies.
In a welcomed and long awaited move, publicly listed housing developers have been able to apply for exemption from the QC regime since Feb 6, 2020, as long as they have a substantial connection to Singapore.
This helps to distinguish between a substantially Singapore-owned listed company and a completely foreign-owned company as prior to the exemption framework, both would be subject to QC.
In addition, "it levels the playing field by putting a Singapore listed property developer on the same footing as private local developers, especially when the publicly listed housing developer has significantly substantial shareholding by Singapore persons as they won't be subject to the QC regime", added Mr Ho. "As a non-exempted listed company, you could get hit twice (both Additional Buyer's Stamp Duty and QC) if you don't clear the units within the stipulated deadlines."
The QC regime requires a housing development to be completed within five years, and all units to be sold within two years of completion. A developer under the QC regime that needs more time to fulfil either deadline will have to seek approval from SLA and pay extension charges - 8 per cent of the land purchase price for the first year of extension, 16 per cent for the second year and 24 per cent per year from the third year.
The charges for extension of the two-year sale deadline are pro-rated to the unsold units. However, there is no pro-rating of the extension charges if more time is needed to complete the project.
The application for exemption from the QC regime is assessed on certain criteria, namely being incorporated in Singapore; a primary listing on the Singapore Exchange with Singapore as the principal place of business; the chairperson and majority of the board being Singapore citizens; a significantly Singaporean substantial shareholding interest in the company; and a track record in Singapore.
Meanwhile, as part of the fine-tuning that was implemented in late June 2021, two refinements were made to how the shareholding interest criterion is assessed.
Where shares are held through a whitelisted nominee company, these shares will be counted towards the shareholding interest criterion as long as the Singaporean substantial shareholder(s) retains control over the voting rights to the shares held through the whitelisted nominee company.
Based on the latest list available on the SLA website, there are five white-listed nominee companies. The list will be reviewed and updated periodically.
Secondly, a housing developer will be considered to have a significantly Singaporean substantial shareholding interest if Singaporean shareholders from the same family collectively form the biggest substantial shareholder and hold at least 30 per cent interest in the total voting rights and issued shares in the company; at least one shareholder in the family has to be a substantial shareholder and identified as the primary shareholder.
Shares also have to be held directly or through companies fully owned by family members. In addition, the largest single foreign substantial shareholder cannot hold over 30 per cent of the voting rights and issued shares in the company.
Where QC is concerned, however, analysts have pointed out that developers would still be motivated to complete and sell their units within the ABSD timeframe - which supercedes QC - since all developers are still subject to ABSD. ABSD is also seen as more punitive than QC since developers will get hit with ABSD if they fail to clear all their units within deadline, whereas QC is pro-rated.
Developers are required to develop any residential site and sell all units within five years to quality for upfront remission of ABSD on the land purchase price. Failing to do so means that the developer will have to stump up 25 per cent ABSD, with interest.
The government has, however, granted extensions to the completion and sales timelines of residential development projects for qualifying housing developers as a result of the disruptions caused by the pandemic.
