The government of Singapore first announced about Additional Buyers Stamp (ABSD) Duty in 2013 and revised it on the first month of 2013. The government did this with the motive of controlling the price growth of the property industry. Briefly, ABSD is a tax levied when one purchases a residential property. The tax is applicable for both Private properties and HBD flats. The amount to be paid depends on a number of factors that are enumerated in the bill. For Singaporeans, there is a 7% tax levied on a second property purchased and 10% tax levied on the third and subsequent property. Of course, we all hate paying more taxes. With that, you might have questioned yourself if there are any legal ways to cut down on ABSD. Following that line of thought, below are ways to buy property in Singapore,to avoid paying ABSD.
By definition, decoupling is the process through which the joint ownership of property is separated and single hence it can be transferred to one person. Note that this process is a legal one and must be strictly performed by a lawyer. This method has gained popularity in the recent past as an effective way for joint property holders to free one of the owner from the burden of paying ABSD or taking an 80 percent Loan (if applicable) when they wish to buy another property. There are two ways to decouple property in Singapore. That is, by way of gift and by way of part purchase.
Decoupling by gift entails one partner giving away their ownership of the property without putting money into consideration. In simple words, one of the partners gives away their share of the property without expecting a monetary pay back. Nevertheless, this procedure can only be performed if the property is fully paid and no pending mortgage loan exists. Additionally, the accrued interest plus the CPF of the party exiting must be refunded. Based on the value of the property, couple will pay 3 % of Buyer stamp Duty. If this kind of decoupling is done within 4 years from the time the property was purchased, the couple will still pay the Seller Stamp duty. For PRs and foreigners, the ABSD is still applicable.
However, couples are greatly discouraged from undertaking decoupling by gift for its negative implications when couples opt to sell the property. Giving away property by gift will go a long way into haunting the property for the first five years due to the stipulations in the Bankruptcy Act. With that, decoupling by part sell is another option that is encouraged instead.
Decoupling by part sell entails selling the shares held by the two couples to one of them. Just like the decoupling by way of gift, the idea behind this undertaking is to enable one of the partners to purchase property as first timer without the pain of paying 80 percent loan and ABSD. Nonetheless, be ready to still pay the normal charges and fees that involve sales transactions. Since this transaction is similar to the purchase of property, it has to be performed by two different law firms as stipulated legally. If this undertaking is done within 4 years from the property purchase date, one of the partners will still pay the seller stamp duty.