The Inland Revenue Authority of Singapore (IRAS) is actively auditing and challenging “99-to-1” co-ownership arrangements used by residential property purchasers seeking to circumvent Additional Buyer’s Stamp Duty (ABSD) liabilities. This enforcement action targets schemes deemed by the Commissioner of Stamp Duties (CSD) as deliberate tax avoidance.
The ABSD Mechanism and the Loophole Target:
ABSD, a significant government tool for managing residential property demand and prices, applies progressively higher rates based on the buyer’s profile (e.g., citizenship, residency status) and crucially, their existing property count. A key provision often overlooked is that when two or more parties purchase a property jointly, ABSD is levied on the entire property value based on the highest applicable rate among the co-purchasers.
The “99-to-1” scheme typically involves two co-purchasers (e.g., a parent and child, or spouses where one owns other properties) taking unequal shares in the property title – often 99% and 1%. The primary aim is to attribute the purchase to the party with the lower ABSD rate (e.g., a first-time buyer or Singapore Citizen), thereby attempting to minimize the total ABSD payable compared to a more equal split or sole ownership by the party liable for higher ABSD.
IRAS’s Stance and Enforcement:
IRAS, through the CSD, has clearly classified these specific unequal share arrangements implemented primarily for ABSD reduction as “stamp duty avoidance arrangements.” The authority contends that the disproportionate ownership shares do not reflect the genuine beneficial interests or financial contributions of the parties involved. Recent years have seen a marked increase in audits and challenges against such structures.
Legal and Practical Risks for Buyers:
Purchasers who have utilised or are considering “99-to-1” schemes face substantial risks:
- Audits & Investigations: IRAS is actively reviewing past transactions.
- Reassessment: The CSD can disregard the 99-1 split and recalculate the ABSD based on the co-purchaser liable for the highest rate, applying it to the full property value.
- Penalties: Significant penalties, often a multiple of the deficient duty amount, can be imposed on top of the recovered ABSD.
- Interest: Late payment interest accrues on unpaid duties from the original transaction date.
This intensified audit focus serves as a stark warning to property buyers, investors, and advisors. Relying on the “99-to-1” strategy specifically to lower ABSD is now a high-risk activity with potentially severe financial repercussions. Buyers considering joint property acquisitions must carefully assess their ABSD liabilities based on the highest applicable rate among purchasers and ensure ownership structures reflect true beneficial interest to avoid falling foul of IRAS enforcement.