Demand and interest for residential properties in Singapore have remained strong over the decades due to their track record of steady appreciation. One of the cooling measures that was introduced in 2011 to stabilise the market is the Additional Buyer’s Stamp Duty (ABSD), which is payable for second and subsequent property ownership. This is on top of the Buyer’s Stamp Duty (BSD) that needs to be paid for the transfer or sale and purchase agreements of residential properties.
However, unlike the BSD, you can apply for remission of ABSD under a few scenarios. One strategy that is used by some affluent buyers is to buy the additional property through a living trust, which, upon fulfilling certain conditions, would qualify for remission of ABSD. This article explains what it is and how you can claim for a remission of ABSD (Trust).
Buying Residential Property Under A Living Trust
A living trust is generally referred to as a legal document or trust that is created by an individual (i.e., the settlor) during his/her lifetime. An appointed trustee is given the responsibility of managing the assets for the beneficiaries of the trust, who may or may not have been identified when the living trust was created. Living trusts are commonly established by parents or grandparents to leave an advance legacy for their children or grandchildren, who are typically under 21.
Before 9 May 2022, ABSD was payable depending on the profile of the beneficiary owner of the residential property transferred into the trust. However, in cases where the trust was structured such that there was no identifiable beneficial owner, ABSD did not apply.
This created a loophole for some affluent buyers to purchase additional residential properties, purportedly for their children or family members, without assigning an identifiable beneficiary. As such, it allowed them to enjoy both rental and capital appreciation without incurring ABSD.
Implementation Of ABSD (Trust)
This loophole was closed with the implementation of ABSD (Trust) to all transfers or sale and purchase agreements of residential properties into a living trust on or after 9 May 2022.
The initial ABSD (Trust) rates of 35% was revised upwards since 27 April 2023 to 65%. While the ABSD (Trust) is to be paid upfront when the residential property is transferred to the living trust, it can qualify for full or partial remission if certain conditions are met.
Read Also: How Does Singapore’s ABSD Tax Rate For Foreigners Compare With Other Countries
Conditions For Remission Of ABSD (Trust)
The remission of ABSD (Trust) is provided via a refund with the amount remitted based on the difference between the ABSD (Trust) rate of 65% and the highest applicable rate based on the profile of the beneficial owner.
In order to receive the remission, you must fulfil the following conditions:
Condition 1: The residential property is held on trust for identifiable individual beneficiaries only.
Unlike previously, where the ABSD was not applicable where the trust had no identifiable beneficial owner, with the latest change, remission is only given to trusts that have an identifiable beneficial owner.
An identifiable individual beneficiary is someone who:
- is identified in the declaration of the trust as a beneficiary of the property whether solely or together with another; and
- because of the trust, has beneficial ownership of the property that cannot be revoked or varied, or subject to any subsequent condition under the terms of the trust.
Condition 2: The ABSD (Trust) of 65% has been paid upfront.
Condition 3: Application for refund must made within 6 months after the date of execution of the instrument.
Read Also: 4 Ways You May Not Be Eligible For ABSD Refund (Even If You Don’t Intend To Own Multiple Properties)
Scenarios Where Remission of ABSD (Trust) Will Not Apply
Example 1: Buying On Trust For An Unborn Child
Residential properties that are bought under trust for unborn child will not be eligible for remission of ABSD (Trust) as the beneficiary (i.e., the unborn child) is not an identifiable individual beneficiary.
Example 2: Beneficiary’s Interest In The Property Under Trust Is Contingent On Meeting Certain Conditions
“Conditional Trusts” that are created where the child (i.e., beneficiary) is only entitled to the property upon fulfilling certain conditions, such as turning 21, graduating from university, or getting married. Similarly, in these sitations the settlor would not qualify for any remission of the ABSD (Trust).
How To Apply For Remission
Remission for ABSD (Trust) can be applied via the e-Stamping portal. Select “Request” > “Apply for assessment/appeal” > “Assessment (including remission and penalty)” under New Application.
Along with your application, you need to submit a copy of the trust instrument and a copy of the option to purchase or sale and purchase agreement.
Other Considerations Worth Noting When Buying Property Via A Living Trust
When buying a residential property via a living trust, the settlor needs to pay in full, as no loan or use of CPF funds is allowed. Including the BSD, it may mean paying an upfront amount of up to 171% of the purchase price. Therefore, this may only be a viable option for the more affluent buyers who wish to give a head-start to their young children by vesting a beneficial interest in them immediately.
Doing so, however, restricts not only the children’s ability to purchase HDB flats in the future, which requires a wait period of 30 months from selling the private property, but also means receiving less in government payouts like the GSTV vouchers. Nevertheless, it allows parents to help their children get an early footing in the property market.
Read Also: How Much Buyer’s Stamp Duty (BSD) And ABSD Singaporeans, PRs And Foreigners Need To Pay – And When
The post Remission Of ABSD (Trust): Why Is It Allowed And How Does It Work appeared first on DollarsAndSense.sg.
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