Policy on "99 to 1" Arrangements for Stamp Duty Payment in Property Transactions and Measures to Prevent Recurrence

Parliamentary Question by Mr Yip Hon Weng:

To ask the Deputy Prime Minister and Minister for Finance with regard to the 99-to-1 arrangement for stamp duty payment for property purchases (a) how does IRAS differentiate between wilful avoidance and honest mistakes in such arrangements; (b) what criteria does IRAS use to determine an honest mistake; (c) under what circumstances will IRAS audit cases involving the 99-to-1 arrangement for stamp duty payment; and (d) how will IRAS work with the Council for Estate Agencies to identify and penalise property agents who promote such arrangements.

Parliamentary Question by Mr Chua Kheng Wee Louis:

To ask the Deputy Prime Minister and Minister for Finance (a) what is the assessed number of cases in each year over the last five years where first-time buyers of private residential properties have signed fresh agreements to sell one per cent of the same property shortly after exercising the purchase options; (b) how many audit letters have been sent by IRAS questioning such transactions in 2023; and (c) what is the impact of such transactions on the residential and mortgage markets in Singapore.

Parliamentary Question by Ms Mariam Jaafar: 

To ask the Deputy Prime Minister and Minister for Finance in light of the probe by the Inland Revenue Authority of Singapore (IRAS) on property purchases structured in a "99-to-1" manner for the purpose of avoiding the Additional Buyer’s Stamp Duty (ABSD), what are steps that the Government is considering to hold agents and other marketers of such potential tax avoidance schemes accountable.

Parliamentary Question by Mr Don Wee:

To ask the Deputy Prime Minister and Minister for Finance regarding IRAS’ investigation into cases of property purchases structured in a 99-to-1 manner to avoid the Additional Buyer’s Stamp Duty (ABSD) (a) how many cases have been uncovered so far; (b) what are the three most common relationships between the property owners; and (c) why has it taken IRAS more than a decade to start investigations as the ABSD was introduced in 2011.

Parliamentary Question by Mr Murali Pillai:

To ask the Deputy Prime Minister and Minister for Finance (a) how many cases suspected to be structured in a 99-to-1 manner to avoid Additional Buyer’s Stamp Duty  (ABSD) are being investigated by IRAS; (b) what is the estimated aggregate amount of ABSD that is avoided as a result of these suspected transactions; and (c) whether IRAS also investigates the role of facilitators to the purchase transactions with a view to establishing whether they have abetted the buyers to avoid ABSD.

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Parliamentary Reply by Senior Minister of State for Finance, Mr Chee Hong Tat:

Mr Speaker, may I have your permission to answer PQs 10 to 14 together? 

Mr Speaker, so my response to these PQs will also address the PQ filed by Mr Desmond Choo that is scheduled for a subsequent Sitting. Mr Choo may wish to withdraw his PQ after this Sitting, if he is satisfied with the reply to his question.

When a residential property is jointly purchased by two or more buyers, the Additional Buyer’s Stamp Duty (ABSD), the rate that we use arising from the buyer with the highest ABSD profile will apply on the entire value of the purchase. Hence, when a single purchase is split up into two or more steps to reduce the tax payable, the Commissioner of Stamp Duties is empowered under Section 33A of the Stamp Duties Act to disregard the individual steps and assess stamp duty as a single joint purchase, and to recover the rightful amount of ABSD due. 

The “99-to-1” property purchase arrangements typically involve individuals without any prior property count buying residential properties in their name initially, and then within a very short period of time, selling the 1% interest to another individual who has a higher ABSD profile. 

From 2018 to 2021, about 0.5% of private residential properties transacted involved such “99-to-1” or similar arrangements, where the owners sold a partial interest in their property to another buyer within a short period of time. The buyers were typically spouses or other immediate family members, with a higher ABSD profile, but with the ability to secure financing for the property. By structuring the transaction in this manner, the parties involved have effectively reduced the ABSD on the purchase of the property.

Individuals may enter into various property purchase arrangements for different reasons, both tax and non-tax-related. IRAS adopts a risk-based approach to detect and enforce against non-compliance and tax avoidance. As part of its surveillance efforts, IRAS detected a small but rising number of “99-to-1” arrangements in recent years. It has therefore initiated audits of such transactions to better understand the circumstances of each case, and ensure that buyers fulfil their rightful stamp duty obligations. 

Whether a “99-to-1” arrangement involves tax avoidance depends on the facts and circumstances surrounding the specific case. Should IRAS determine that tax avoidance has occurred, it will recover the rightful amount of stamp duty from the buyers, and may impose a 50% surcharge on the additional stamp duty payable. There is no statutory time limit for stamp duty audits. 

As these “99-to-1” arrangements make up a very small proportion of the overall residential property market transactions, their impact on the residential and mortgage markets in Singapore is not significant. 

Other than the buyers, the Government also takes a serious view against individuals who promote or facilitate such tax avoidance arrangements. IRAS will refer those identified of doing so to the relevant regulatory agencies. In the case of property agents, which Members asked about, IRAS will refer them to the Council for Estate Agencies (CEA) for investigation and disciplinary action in accordance with CEA’s Code of Ethics and Professional Client Care. Depending on the severity of the breach, agents may face financial penalties and/or suspension of their registrations. 

IRAS takes a firm stance against tax evasion and avoidance. The large majority of taxpayers are compliant and pay the taxes that are due. We thank them for their contributions to our fair and progressive system of taxes and transfers, where individuals with greater means will contribute more and those who are vulnerable and earn lower income will receive more help.