ABSD now payable on all transfers of residential property to trusts, refunds possible in certain cases

Previously, ABSD had not requested a transfer of ownership without an identifiable beneficial owner

For most Singaporeans, owning their own home is a dream.

But some may also want to make preparations to own the property after they leave.

Therefore, they can transfer ownership to an inter vivos trust, even if there is no beneficiary identified yet.

However, they will now find themselves paying more, as the additional buyer’s stamp duty (ABSD) is now applicable to all such transfers of ownership to trusts.

Source: Unsplash

Refunds are however possible, provided that certain conditions are met.

35% applicable from May 9

In a press release issued on Sunday, May 8, the Ministry of Finance (MOF) said the new fees would apply to transfers made from Monday, May 9.

Baptized ABSD (Trust), it will return to 35% of the sale price, on any transfer of residential property into a living trust.

This even if there is no identifiable beneficial owner at the time of the transfer.

It must be paid in advance as soon as the transfer takes effect.

ABSD previously not payable for certain transfers

Currently, when a residential property is purchased in Singapore, the home buyer must pay a Buyer’s Stamp Duty (BSD).

The same is true if the property is transferred to an inter vivos trust, which is created by someone during their lifetime. It allows a trustee to manage the asset on behalf of the prospective beneficiary.

The ABSD would also be payable depending on the profile of the beneficiary.

However, before the entry into force of the new rule, if there was no identifiable beneficial owner at the time of the transfer, the ABSD did not apply.

An “identifiable beneficial owner” means that the person is identified in the trust deed as the beneficiary, and their beneficial ownership is not revocable, variable or subject to any subsequent condition.

Source: Unsplash

This loophole apparently meant that people could avoid paying ABSD by not identifying a payee, although they may already have one in mind.

Promote a stable and sustainable market

The government introduced ABSD (Trust) “to bridge and bridge this gap”, the finance ministry said.

They felt that the ABSD should apply to all transfers of residential property to living trusts, whether or not there are identifiable beneficial owners.

In this way, a “stable and sustainable residential real estate market” will be promoted.

Reimbursement possible in certain cases

The trustee can apply to the Inland Revenue Authority of Singapore (IRAS) for a refund, as a concession.

This request must be made within six months of the execution of the act.

However, certain conditions must be met for reimbursement, for example all beneficial owners of the property are identifiable natural persons.

Source: Flickr

If a refund is authorized, it will be calculated on the basis of 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.

Property cooling announced in December

Notably, the government introduced property cooling measures in December, including increasing the ABSD from 12% to 17% for Singaporeans buying a second property.

With the additional rules, those wishing to transfer their residential property to an inter vivos trust may want to think twice.

If they still want to do so, they must ensure that all beneficial owners of the asset are identifiable.

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Featured image adapted from Mark C on Unsplash.

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