Singapore – New Duties Payable in Relation to Trusts with Residential Property and Property Holding Entities
The Singapore Ministry of Finance announced 3 new types of duties in relation to trusts on 8 and 9 May 2022 to plug a gap in the existing Additional Buyer’s Stamp Duty (ABSD) and Additional Conveyance Duties (ACD) regime. Interested persons may wish to seek legal and tax advice on their trust structures.
- ABSD (Trust) – On or after 9 May 2022, ABSD of 35% will apply on any transfer of residential property into a living trust. ABSD (Trust) is payable upfront, and the trustee may apply to the Inland Revenue Authority of Singapore (IRAS) for a refund of all or part of the ABSD (Trust) paid if all remission conditions are met.
- ACD (Trust) – On or after 10 May 2022, all transfers of equity interests in property holding entities (PHEs) into a living trust will be subject to ACD.
- Stamp Duty on Renunciation of Interest in Residential Property Held on Trust – On or after 10 May 2022, the usual applicable stamp duties for a transfer of interest in residential property will apply to the transferor and transferee when a beneficiary of residential property held on trust renounces its interest. Notice will also need to be given to the settlor and the Commissioner of Stamp Duties.
Additional Buyer’s Stamp Duty (Trust)
Before 9 May 2022, when a residential property is transferred into a living trust, the stamp duties payable depended on the profile of the beneficial owners. Where the trust was structured such that there was no identifiable beneficial owner at the time of the transfer, ABSD was not payable.
On or after 9 May 2022, the new ABSD (Trust) of 35% applies to all transfers of residential property into a living trust. ABSD (Trust) is required to be paid upfront to IRAS at the time of transfer, regardless of the profile of the beneficial owners and regardless of whether they are identifiable at the time of transfer.
As a concession, IRAS will allow for remission of all or part of the ABSD (Trust) paid, with the refund amount being the difference between the ABSD (Trust) rate of 35% and the ABSD rate corresponding to the profile of the beneficial owner with the highest applicable ABSD rate.
A trustee may apply to IRAS for remission of ABSD (Trust) within 6 months after execution of the instrument if all the following conditions are met:
- All beneficial owners of the residential property held on trust are identifiable individuals;
- Beneficial ownership of the residential property has been vested in all of these beneficial owners at the time of property transfer into the trust; and
- The beneficial ownership cannot be varied or revoked, or be subject to any condition subsequent, under the terms of the trust.
The application for remission must be made within 6 months from the date of execution of the instrument for transfer of the residential property. The refund amount will be based on the difference between the ABSD (Trust) rate of 35% and the ABSD rate corresponding to the profile of the beneficial owner with the highest applicable ABSD rate.
More information may be found at:
Additional Conveyance Duties (Trust)
A property holding entity is an entity which has at least 50% (i.e. asset ratio) of its total tangible assets comprising residential property in Singapore. A significant owner of a PHE refers to a person or entity who beneficially owns at least 50% equity interest or voting power in a PHE either on its own or with its associates.
ACD has applied to and continues to apply to transfers of equity interests in PHEs into living trusts with identifiable beneficial owners who are or become significant owners of the PHEs. However, before 10 May 2022, where there was no identifiable beneficial owner at the time when the equity interests in PHEs are transferred into the trust, ACD may not apply.
On or after 10 May 2022, the new ACD (Trust) applies to transfers of equity interests in PHEs into a living trust, regardless of whether there is any identifiable beneficial owner at the time of the transfer.
At the time of writing, the Additional Conveyance Duties are as follows, levied on the prevailing market value of the PHE’s underlying residential property at the time of the qualifying equity sale/transfer, pro-rated by the percentage of the beneficial interest transferred in the PHE.
- Additional Conveyance Duties for Buyers (ACDB):
- Existing Buyer’s Stamp Duty at 1% to 4%; plus
- Existing Additional Buyer’s Stamp Duty at 40% (flat rate)
- Additional Conveyance Duties for Sellers (ACDS):
- Seller’s Stamp Duty at 12% (flat rate)
More information can be found at:
Stamp Duty on Renunciation of Interest in Residential Property Held on Trust
On or after 10 May 2022, when interest in a residential property held on trust is renounced by a beneficial owner, the usual stamp duties (Seller’s Stamp Duty, Buyer’s Stamp Duty and Additional Buyer’s Stamp Duty, as applicable) for a transfer of interest in residential property will apply to the transferor and transferee on the disposal and acquisition of interest.
The beneficial owner who renounces its interest must notify the settlor and the Commissioner of Stamp Duties of the renunciation in writing through the prescribed form and within a prescribed period. Failure to do so is an offence and will be liable on conviction to a fine not exceeding S$1,000. The original beneficial owner may also be liable for SSD upon the renunciation.
The settlor as the new beneficial owner upon the renunciation will have to pay the applicable stamp duty (e.g. BSD and/or ABSD).
More information can be found at:
The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.