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how to own two properties without paying absd

Own 2 Properties Without Paying Additional Buyer’s Stamp Duty (ABSD)

Understanding The Intricacies of Owning 2 Properties

Owning a second property in Singapore is akin to navigating uncharted waters; without precise knowledge, one may easily find oneself at sea.

Yet, meticulously charting this course can unveil a path free of the Additional Buyer’s Stamp Duty – akin to discovering a hidden strait in a treacherous maritime landscape.

Understanding Buyer's Stamp Duty (BSD)

Buyer’s Stamp Duty (BSD) is the tax levied on property purchases as part of statutory costs. BSD applies to all property acquisitions, whether you are a local citizen or a foreign person, anchoring the initial financial implications of real estate transactions. 

The amount of BSD incurred will be based on the purchase price or the property’s market value, whichever is higher.

Purchase price or market value of the propertyBSD rates for residential propertiesBSD rates for non-residential properties
First $180,0001%1%
Next $180,0002%2%
Next $640,0003%3%
Next $500,0004%4%
Next $1,500,0005%5%
Remaining amount6%5%

Understanding Additional Buyer's Stamp Duty (ABSD)

In addition to BSD, purchasers of additional residential properties are subject to the Additional Buyer’s Stamp Duty (ABSD). The Additional Buyer’s Stamp Duty or ABSD was imposed on December 8th, 2011.

The ABSD serves as a fiscal measure to moderate the residential property market, thereby tempering excess investment and speculation.

Navigating around ABSD requires strategic planning and robust understanding of the exceptions provided under the prevailing property tax regime.

Residency StatusRate on First PurchaseRate on Second PurchaseRate on Third Purchase
Singapore CitizenNIL20%30%
Singapore Permanent Resident5%30%35%
Corporate Entity65%65%65%

BSD vs ABSD: What You Pay When Buying Property

Buyer’s Stamp Duty (BSD) represents a mandatory tax imposed on all property acquisitions in Singapore, serving as an integral component of the overall transaction cost. The BSD rate is calibrated according to the property’s purchase price or market value, whichever is higher.

On top of BSD, there is an additional fiscal layer known as Additional Buyer’s Stamp Duty (ABSD), which applies to certain categories of property buyers. Predominantly affecting those pursuing multiple property ownership, ABSD acts as a stabilizing mechanism against speculative forces in the housing market.

Owners may strategically sell one property before acquiring another to circumvent paying ABSD.

The intricate calculus of property acquisition: to be exempt from paying ABSD while owning two properties, one must navigate a tapestry of regulatory provisions. A deep understanding of the exceptions to ABSD is essential, as is timing the sale and purchase of properties to align with these regulations. Precision in this choreography is the keystone to financial prudence in property investment.

ABSD Remission: Criteria and Eligibility

Understanding ABSD remission is crucial.

Eligibility for ABSD remission is specifically circumscribed. The criteria for exemption hinge on the type of property being purchased and the profile of the buyer. For instance, married couples comprising at least one Singapore Citizen are entitled to ABSD remission on their second residential property. Importantly, such couples must meet all stipulated conditions to benefit from the remission.

The window for remission application is narrow.

To qualify for remission, married couples must – as a unitary entity – dispose of their first residential property within a stipulated timeframe. Currently, this window is 6 months for completed properties and 3 years for uncompleted properties from the date of execution of the sale and purchase agreement.

Strict compliance with remission requirements is paramount.

The recent policy revisions to ABSD remission, effective from the second quarter of 2023, underscore the meticulous dynamics involved. Potential property buyers must ensure due diligence and comprehension of the stipulated timelines and conditions, lest they face the prospect of forfeiting eligibility for remission and incurring substantial additional costs.

Please refer to the complete and prevailing guidelines at IRAS website.

Legal Workarounds to Avoid ABSD

One legal approach to circumvent the ABSD is through careful timing and structuring of property ownership transfers within the confines of matrimonial parameters.

Specifically, if a couple decides to decouple their legal partnership amicably, they can potentially own one property each without incurring the ABSD. This decision must be taken with judicious consideration of the legal implications and compliance with statutory obligations to ensure legitimacy.

Decoupling, however, involves intricate legal proceedings and precise adherence to the prescribed guidelines. It is a complex area that should be navigated with the counsel of experienced legal professionals. This method also carries emotional considerations, and as such, it is imperative that the decision to pursue this avenue aligns with the couple’s broader personal circumstances.

1. Decoupling Ownership: Strategy for Married Couples

Decoupling is a nuanced strategy that married couples utilise to restructure property ownership. When correctly implemented, it enables each spouse to hold a property under a single name, potentially circumventing the imposition of Additional Buyer’s Stamp Duty (ABSD) for a second property.

Since the introduction of the ABSD, savvy investors have sought legal measures such as decoupling to avoid the hefty tax. This involves transferring one spouse’s share in the property to the other, often by way of part sale or gift. The outcome is that one spouse becomes the sole property owner, while the other has the capacity to purchase another property without the burden of additional tax.

To commence the decoupling process, a couple must fulfill certain prerequisites and follow strict procedures. These include obtaining an accurate property valuation, settling existing mortgage considerations, and ensuring the transfer adheres to legal and financial regulations.

Such financial manoeuvrability requires meticulous planning and an understanding of the long-term ramifications. Engaging in decoupling demands careful assessment of its effects on loan eligibility, property rights entitlement, and fiscal outcomes for both parties involved.

In conclusion, the strategic advantage of decoupling must be weighed against its procedural complexities and potential consequences. Professional guidance is paramount to navigate the intricacies of property law and financing, thereby ensuring the integrity and success of the ownership transfer.

2. Utilizing a Significant Other's Name

Strategies abound for property acquisition.

Potential property buyers often seek to circumvent Additional Buyer’s Stamp Duty (ABSD) by capitalizing on the role of their significant other. This method hinges on the possession of one property solely in the name of one partner, thereby allowing the other to purchase an additional property under their name without incurring ABSD. However, this is contingent on the fact that the significant other does not own any current property.

Buying a property each from the start is the most straightforward approach. Such an approach calls for a rigorous assessment of both parties’ financial profiles.

It’s not merely a matter of convenience—when one engages in such a practice, they must consider both partners’ ability to finance the property and accept the legal implications that come with sole ownership.

Should one proceed down this path, recent regulatory changes, especially those post the 2021 cooling measures, must be meticulously adhered to. Such strategies must respect the framework established to ensure a balanced market. A failure to comply could result in severe penalties or the unraveling of seemingly astute financial stratagems.

3. One HDB Owner and One Essential Occupier

Most couples tend to opt for a HDB BTO flat as their first matrimonial home. In this case, you and your partner can decide the manner of ownership such that one person is the owner the the other person is the essential occupier. 

According to HDB, an essential occupier (or core occupier) is a family member listed in the Application Form to form a family nucleus, allowing you to qualify for an eligibility scheme to purchase a flat. It can be for a new flat, like a BTO, or a resale flat.

Typically, the essential occupier is the spouse of the main applicant. However, in some cases, the essential occupier can also be other family members, such as parents or children, depending on the scheme under which you are forming the family nucleus for an HDB flat.

The essential occupier is not an owner or co-owner of the HDB flat as they do not have any share in the apartment or legal right in it.  Essential occupiers are unable use their CPF OA to finance the HDB and they cannot be a co-borrower for the housing loan. In the event of a sale in future, all sales proceeds will be returned solely to the owner. 

Do note that the Minimum Occupation Period (MOP) of 5 years applies to both owner and essential occupier of the HDB flat.

The essential occupier can purchase a private property after fulfilling the MOP without having to sell off the HDB. The essential occupier is eligible to apply for a mortgage loan of up to 75% LTV on the purchase price from the banks when purchasing a private private property. Thus, both you and your spouse will be able to own two properties without paying ABSD.

4. Sell One Property and Buy Two Properties

This concept became more popular after HDB plugged the loophole that allowed HDB owners to transfer his/her share of the ownership to a spouse or family member.

Housing Board flat owners who wish to transfer their ownership to a family member are no longer allowed to do so except under six special circumstances including divorce and financial hardship.

Previously, owners were not bound by such restrictions when transferring their flat to a spouse or immediate family member.

Having done so and given up their ownership, HDB dwellers could then purchase a private property without incurring the Additional Buyer’s Stamp Duty (ABSD). 

Selling one property and buying two properties is suitable for HDB owners who have completed their MOP. Couples would sell off their HDB to free up the locked funds in order to proceed with buying a property each in their individual names. 

In such cases, it is important to plan your finances ahead of time so that things can be put into motion once the sale of the flat is finalized. 

Do you intend to buy or sell your property?

You may be thinking what is the next step for you and if it is worth going through the necessary work to buy or sell your property.

When is the best time to sell and can I sell for a better price than my neighbours? 

What are my options for buying a property and how can I get the best deal?

Here at The Landed Collective, we specialise in residential properties and that means HDB Flats, Condos, Landed Houses and New Developer Sales. 

Before you start anything, speak to us for a complimentary consultation as our property agent team will provide you with comprehensive advice, run through the essentials on the property market and answer any questions you may have.