Singapore imposes additional tax surcharge for settling property into lifetime trust
The purpose of the charge, introduced on 9 May 2022, is to close a gap in the previous stamp duty rules. Under those rules, ordinary buyer's stamp duty (BSD) was payable when a residential property was transferred into a living trust and additional buyer's stamp duty (ABSD) was also payable depending on the profile of the beneficial owners of the residential property transferred into the trust. However, where the living trust was structured such that there was no identifiable beneficial owner at the time when the residential property was transferred into the trust, ABSD did not apply, so that the ABSD treatment for transfers of residential properties would be equal whether a trust was involved or not.
The new law states that, in such a case, ABSD at 35 per cent must now be paid in advance. However, refunds will be granted where the sale of residential property is to a trustee holding assets on trust for one or more identifiable individual beneficiaries. Testamentary trusts are also exempt.
The law does not operate retrospectively, applying only to instruments executed from 9 May 2022. However, it is not clear what will happen if a trustee of a pre-existing trust subsequently appoints assets to an identifiable beneficiary or distributes assets to any identifiable beneficiary. The Singapore tax authority might regard any documents involved as a stampable instrument, says law firm Withersworldwide.
The ABSD rate paid will vary depending on the profile of the transferee: whether they are individuals or entities, their nationality or Singapore permanent residency status and also the number of Singapore residential properties they already hold. It is chargeable over and above the normal buyer's 4 per cent stamp duty on purchases of residential properties.
At the same time, Singapore has also introduced an additional conveyance duty (ACD) for trusts and a new stamp duty treatment for renunciations of interest in the residential property held on trust, with effect from 10 May 2022. The ACD applies where the significant ownership threshold has been crossed but there is no identifiable beneficial owner of such equity interests at the time.
'Updating the ABSD regime aligns with the Singapore government's policy of taxing wealth associated with real estate', says Withersworldwide. 'It follows previous moves in December 2021 to increase the ABSD rate, and also the increase in property tax rates in Budget 2022.'
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