How Does Singapore’s ABSD Tax Rate For Foreigners Compare With Other Countries

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On 26 Apr 2023, the government announced the raising of Additional Buyer’s Stamp Duty rates (with effect from 27 Apr 2023). The intention is to ensure a sustainable property market.

Other than the increase in duties for Singapore Citizens and Permanent Residents for the second and subsequent properties, the duties for foreigners have doubled from the previous 30% to 60%.

Read Also: Guide To Understanding Option To Purchase (OTP) In Singapore

What Is ABSD

It is a stamp duty paid on your residential property. The cost is a percentage of your property price or valuation, whichever is higher.

The ABSD liability depends on the profile of the buyer at the date of purchase or acquisition of the residential property. The various factors that determine how much ABSD one has to pay for depend such as on whether the buyer is an individual or an entity, the profile of the buyer, and the count of residential properties owned by the buyer.

Image Credit: IRAS

In Singapore, the ABSD was raised to 60% for foreigners. This means that if a foreigner purchases a unit with a market value of S$2 million, the rate of ABSD will be at S$1.2 million.

This is an additional amount the foreigner will have to fork out in order to obtain the property.

$2,000,000 x 60% = $1,200,000

Image Credit: IRAS

Buyer Stamp Duty, or BSD for short, on the other hand are taxes paid on documents related to either the purchase or lease of a property. BSD is a tax levied on all property purchases, even HDB flats, within Singapore.

Image Credit: IRAS

BSD is rounded down to the nearest dollar, subject to a minimum duty of S$1.

BSD and ABSD must be paid within 14 days after the date of the signed Contract or Agreement. Where the Contract or Agreement is executed (signed) overseas, BSD and ABSD must be paid within 30 days after the receipt of the Contract or Agreement in Singapore.

A document is considered to be duly stamped only when stamp duty is fully paid. Audit checks will be conducted by IRAS to ensure that BSD and ABSD are duly paid. Under the Stamp Duties Act, a penalty of four times the amount of unpaid duty can be imposed.

Assuming that a foreigner purchases a S$2 million property, the BSD rate would be:

$180,000 x 1% + $180,000 x 2% + $640,000 x 3% + $500,000 x 4% + $500,000 x 5%

$1,800 + $3,600 + $19,200 + $20,000 + $25,000 = $69,600

This adds up to S$1.27 million or 63.5% of taxes for a S$2 million property on market value.

Do other countries impose similar property tax on foreigners? We take a look at other cities and their property tax rates.

How Is The Tax Rates On Foreigners Buying A Residential Property In Hong Kong, Kuala Lumpur, Tokyo, London, New York, And Sydney

Hong Kong

The land in Hong Kong is owned by the Chinese government. Property owners lease the land. Foreigners have to pay Ad Valorem Taxes and BSD in order to purchase a home there which can add up to 20% to 45%.

The higher the quantum of the property purchase, the higher the Ad Valorem stamp duty.

You will need to put down at least a 40% deposit for properties under HK$7 million.

There are also certain restrictions on people of certain nationalities. Hong Kong is not open to selling condos to Afghans, Albanians, Cubans, North Koreans and Chinese from the mainland (unless they are Permanent Residents in another country).

Malaysia – Kuala Lumpur

You are required to get permission to purchase property as a foreigner from the relevant state authorities. The state can mandate individual requirements or payment terms at its own discretion.

Foreigners cannot purchase properties built on Malay reserved land, low-cost or medium-cost affordable units.

You can also purchase properties under the Malaysia My Second Home Visa, which provides a renewable 10-year maximum, multiple entry visa.

The minimum price of the home needs to start at RM$1 million.

The stamp duties are higher for costlier properties. An RM$2 million property will cost about 3% or RM$64,000.

Tokyo

There are no legal restrictions on buying property in Japan for foreigners. In fact, the same rules and legal procedures apply to both Japanese and non-Japanese buyers.

There is no need to possess citizenship or residency to buy a house in Japan. However, buying a property in Japan will not grant the purchaser a Japan residence visa or investor visa.

The fees include brokerage fees (3% of purchase price + Consumption Tax and other fees), Acquisition Tax (a tax that is based on the government’s assessment of the land and the building value), Licence Tax (0.4% to 2% depending on transfer), Stamp Duty (about ¥$60,000 for a ¥$2 million home)

London

There are both freehold and leasehold properties in London. The Stamp Duty Tax starts at 2% and goes up to 12%. There is also Income Tax which starts at 20% and can go up to 45%.

Inheritance Tax is usually levied at 40%. Do note that you will have to pay Capital Gains Tax as well if you later decide to sell your property.

You have to expect that you will pay larger deposits of up to 40% as well as provide your recent financial details.

New York

There are no laws or restrictions and there is no additional Stamp Duty for purchases in this state. For example, a property transaction in Manhatten will be roughly 2% of the purchase price (if you pay all in cash). This is similar for locals and foreigners. The taxes are the New York State Transfer Tax and the New York City Transfer Tax.

New York State imposes a Real Estate Transfer Tax on conveyances of real property or interests therein when the consideration exceeds US$500. Tax is computed at a rate of US$2 for each US$500, or fractional part thereof, of consideration. An additional tax of 1% of the sale price (Mansion Tax) applies to residences where consideration is US$1 million or more.

But do note that there is also the Foreign Investment In Real Property Tax Act (FIRPTA) that requires 15% of the sale price to be held back as withholding tax if the seller is a foreigner. The foreign seller gets the withholding tax back in the next income tax return cycle.

A 40% downpayment is usually expected of foreign borrowers.

Do note that at the time of death, a Foreign Owner’s Estate Tax can be up to 56% of the property value, so it is crucial for foreigners to prepare their finances clearly and early and protect their assets.

Sydney

In general, you need to be a Permanent Resident or Citizen to buy property in Australia. Many home loans also require you to be a local.

But there are still some properties that foreigners can buy. The property needs to be categorised as an investment and you need to get government approval.

You’ll need to submit an application to the Foreign Investment Review Board (FIRB), which is in charge of assessing foreigners who want to buy or invest in a home in Australia. The property has to be new or vacant land and not an established dwelling.

If you do buy an established dwelling, you are required to live in it and sell it once you no longer live there.

The fees include Stamp Duty, and Foreign Buyers’ Duty (which can be around 8%). Each state has its own stamp duty amount.

Featured Image Credit: DollarsAndSense

Read Also: Winners & Losers Of The April 2023 Property Cooling Measures

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