Editor’s Note: This post was originally published in September 2022 and has been updated for accuracy and comprehensiveness.
Stamp duty is a tax on documents relating to immovable properties such as HDB flat Sales & Purchase Agreements, HDB landlord Tenancy Agreements etc.
But why do we need to pay it at all? Is stamp duty a necessary tax?
When buying a property, the ownership changes from the previous owner to you (the new occupier) – and it must be legally and officially registered. It is not only an offence to use a document which Stamp Duty has not been paid on, it is also important to note that only a document where Stamp Duty is paid can be admitted as evidence in the court in cases of disagreements.
Stamp duty is computed based on the consideration or market value of the relevant asset, whichever is higher. The Inland Revenue Authority of Singapore (IRAS) collect the 2 stamp duties imposed on the buyer:
- Buyer’s stamp duty (BSD)
- Additional buyer’s stamp duty (ABSD)
Buyer’s Stamp Duty
The BSD is levied on all purchases of property e.g. residential such as HDB units and Executive Condominium, commercial or industrial properties. The property is considered purchased when you exercise your option to purchase (OTP) or when you execute the sales and purchase agreement.
New Update: The BSD rates for both residential and non-residential properties will be raised, as announced during Budget 2023, with effect from 15 February 2023.
The changes in BSD rates only apply to homes with a portion of value in excess of $1.5 million and up to $3 million, which will now be taxed at 5 per cent. That’s a 1 per cent hike from the current rate. Any homes with a value in excess of $3 million will be taxed at 6 per cent.
There will be a transitional BSD remission for properties acquired on or after 14 Feb 2023 such that the former BSD rates will apply, subject to the remission conditions being met, which include:
- The Option to Purchase (OTP) was granted by sellers to potential buyers on or before 14 Feb 2023;
- This OTP is exercised on or before 7 Mar 2023, or within the OTP validity period, whichever is earlier; and
- This OTP has not been varied on or after 15 Feb 2023.
BSD on or after 15 February 2023:
|Amount||BSD Rates for residential properties||BSD Rates for non-residential properties|
|Amount exceeding $3,000,000||6%||5%|
For example, if you buy a property at $500,000 you would have to pay:
On the first $180k: $180,000 x 1% = $1,800
On the next $180k: $180,000 x 2% = $3,600
On the remaining $140k: $180,000 x 3% = $4,200
Thus, the total BSD amount payable would be $9,600.
If the document is signed in Singapore, BSD must be paid for within 14 days of:
- Exercising the OTP; OR
- Signing of the Sales & Purchase agreement if there is no OTP; OR
- The date of transfer, if both OTP and Sales & Purchase agreement are not available.
With effect from 20 Feb 2018, there are differentiated BSD rates between residential and non-residential properties. The BSD rate for acquisition of residential properties on or after 20 Feb 2018 is up to 4%, and will apply to a portion of residential property value which is more than $1 million.
Additional Buyer’s Stamp Duty
The Additional Buyer’s Stamp Duty (ABSD) was imposed on top of the BSD, and applied to the purchase price, or the current market value of the property, whichever is higher.
However, under certain free trade agreements you’ll be exempt from the ABSD if you’re a citizen or permanent resident of the following countries:
- Switzerland; and
- The USA (citizens only)
Changes in ABSD rates from 16 Dec 2021
In Dec 2021, the government announced that it is raising Additional Buyer Stamp Duty (ABSD) rates and tightening loan-to-value (LTV) limits on residential property purchases, in an effort to cool the property market and keep price increases in line with economic fundamentals.
This means that if you will buy a property on or after 16 Dec 2021, the new ABSD Rates are as follows:
|Citizen||Buying 1st Residential Property||Buying 2nd Residential Property||Buying 3rd and Subsequent Residential Property|
|Singapore Citizen (SC)||0% (no change)||17% (up from 12%)||25% (up from 15%)|
|Singapore Permanent Resident (SPR)||5% (no change)||25% (up from 15%)||30% (up from 15%)|
|Foreigners buying any residential properties||30% (revised)||30% (revised)||30% (revised)|
|Entities buying any residential properties||35% (revised)||35% (revised)||35% (revised)|
These steep changes will impose high additional costs for anyone looking to buy a second property in Singapore. For example, a Singapore citizen will now need to pay $50,000 more in ABSD, based on a $1 million property purchase if that is his or her second property. The duties are even higher from the 3rd property or for non-citizens.
Stamp duty is an inevitable part of buying a property in Singapore, and it’s not the only cost of buying a home to deal with. It’s still certainly a cost that needs to be accounted for in your financial planning. Some couples resort to methods such as decoupling in the hopes of avoiding ABSD charges.
New laws from 9 May, 2022 with regards to residential properties transferred into a living trust:
Additional Buyer’s Stamp Duty (ABSD) of 35% will now apply on any transfer of residential property into a living trust. ABSD will be payable even if there is no identifiable beneficial owner at the time the residential property is transferred into a trust.
So this new change closes a loophole. This ABSD (Trust) is to be paid upfront when the transfer is made.
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