The Singapore government is well known for being an interventionist when it comes to the property market. Besides financing requirements, one other way they control property demand is through a form of tax called stamp duty.
These property taxes ensure Singapore citizens and Permanent Residents have priority in home ownership. They also prevent roller-coaster prices that would hurt the economy and, ultimately, the cost of living.
On the lookout for a new home?
Here are a few things you should know about property stamp duties on residential properties in Singapore:
Buyers stamp duty (BSD) is the tax that is to be paid on the acceptance of Option to Purchase/ Sale and Purchase Agreements. It is a tiered system and is always based on the higher of your property price or valuation.
Buyer stamp duties are always calculated on the bank-indicated property valuation or purchase price, whichever is higher.
To break this down clearly, let’s say Alex buys a property with a selling price of $2,500,000. The property has a market value (valuation) of $2,700,500.
Since the valuation amount is higher than the actual purchase price, the BSD will be calculated on the valuation figure of $2,700,500.
W.E.F 20th Feb 2018, BSD has been revised and is levied differently on residential and non-residential properties. The top-tier BSD rates for residential properties in Singapore have been increased to 4% from 3%.
Buyer stamp duty tax rates broken down into residential and commercial properties are as follows:
|Residential Properties||Commercial Properties|
As you can see from the table above, residential properties above a market value/purchase price of $1,000,000 are applied a 4% BSD rate.
However, this does not apply to commercial properties, which still have a maximum tier of 3% BSD even for prices above a million.
This increase in stamp duty rates is why many Singaporeans have dipped into commercial property investing instead.
Let’s move to a worked example to show how exactly buyer stamp duties are calculated:
Adam bought a private property at a market valuation of $3,500,550 and at $3,200,550 purchase price.
Since the valuation amount is higher than the purchase price, stamp duties are to be calculated at $3,500,550:
|First $180,000||1%||0.01*$180,000 = $1,800|
|Next $180,000||2%||0.02*$180,000 = $3,600|
|Subsequent $640,000||3%||0.03%*$640,000 = $19,200|
|Remaining $2,500,550||4%||0.04*$2,500,550 = $100,022|
|Total BSD = $124,622|
|Purchase Price (PP) / Market Value (MV)||BSD Formula|
|Less than $1,000,000||[0.03% * (PP or MV] – $5,400|
|More than $1,000,000||[0.04% * (PP or MV)] – $15,400|
Using the above simplified formula, the buyer stamp duties Adam would need to pay would also be: ($3,500,550 * 4%) – $15,400 = $124,622
The additional buyer’s stamp duty is the tax to be paid above the buyer’s stamp duty tax rate on the purchase of additional residential property. Do note that ABSD is not applicable to commercial properties.
If you already own a property (whether it is owned fully, jointly, or partially) in Singapore any new purchase of a residential property would be considered an additional residential property.
The ABSD rate is also applied differently based on your citizenship or residency status.
W.E.F 6 July 2018, the ABSD rates for the difference residency statues in Singapore are:
|Singapore Citizens (SC)||ABSD Rate|
|3rd property or more||15%|
|Singapore PR (SPR)||ABSD Rate|
|2nd property or more||15%|
|1st property or more||20%|
I am a foreigner buying my first residential home at a market value of $4 million and the purchase price being $3.85 million on 5th July 2019. What would my computed ABSD be?
Since the market value is higher than the purchase price and ABSD levied on foreigners buying any residential property is at 20%: ABSD would be $4,000,000*20%= $800,000.
|Purchase Price (PP) / Market Value (MV) x Respective ABSD rate|
ABSD will apply if you exercise the option to purchase (OTP) to buy a property before the OTP for your selling property is exercised by your buyer.
Therefore, do ensure that you have a firm check on the timelines of your contra (buying and selling) transaction to avoid any heavy stamp duty payments. You can ask your property agent or a mortgage broker for advice for your planning purposes.
However, if you are a married couple, you can apply for ABSD remission if you sell your previous property within six months of purchasing your new home.
Remember that you must initially pay the ABSD within 14 days of the purchase. Therefore, do ensure you have sufficient funds in your CPF OA account or cash in hand.
A common method to not have to avoid paying ABSD when buying a second property is to go through a decoupling or a part purchase. When decoupling — transferring your share of a property to another co-owner — the BSD is payable on the share transferred.
For example, say you own 50% of a property, and your wife owns the other 50%. If your wife decides to transfer (sell) her share of the property to you, the BSD will be payable on the 50%. This means half the property price or valuation, whichever is higher.
For this reason, homeowners planning to decouple later (to buy a second property) would often allocate shares in their property as 99 -1 with a tenancy in common. That is, 99% to one owner and 1% to the other. This way, BSD is only paid on the one per cent being transferred when decoupling.
If the sale and purchase agreement (S&P) is signed in Singapore, then it has to be paid in 14 days after the S&P is signed.
If the S&P is signed overseas, then it can be paid within 30 days after receiving the agreement in Singapore.
You can use your CPF funds available in your OA account to pay for both buyer stamp duties (BSD) and additional buyer stamp duties (ABSD).
As the process of seeking approval and the release of funds from CPF board towards payment of your stamp duties takes around 3 weeks, do take note of the following:
If you are buying a resale property (either private or HDB) – Stamp duties will have to be paid in cash first and then reimbursed back to you in the form of a cashier’s order by CPF board.
If you are buying a property under construction (BTO or new launch condo) – You can pay for stamp duties directly via CPF and no reimbursement is required.
If the buyer’s stamp duty is not paid on time, then a demand note is issued as a reminder associated with the penalty incurred for not paying on time.
The Inland Revenue Authority of Singapore (IRAS) may recover the amount from the bank, lawyer on owner’s behalf and may even take legal action against them to recover the outstanding amount.
The seller stamp duty (SSD) was introduced to prevent flipping the purchase and almost immediate resale of property at a higher price, which results in inflated prices. As such, the SSD only applies if you sell within the first three years of a property purchase.
SSD is based on the higher of the property price or value at the time of sale. It applies to both residential and commercial properties, and is payable within two weeks of completing the sale.
Seller stamp duty rates:
|Date of Purchase||Holding Period||Seller Stamp Duty (SSD) Rate|
|On and after 11 March 2017||Up to 1 year||12%|
|“||More than 1 year and up to 2 years||8%|
|“||More than 2 years and up to 3 years||4%|
|“||More than 3 years||NA|
Jaden purchased his residential property on 5th June 2017 and sold it on 20th June 2018 at a price of $4,180,000 .
Since the property was held for more than a year but lesser than 2 years, a seller stamp duty rate of 8% applies: SSD = $4,180,000*8%= $334,400
|Property Sold Price x Respective SSD rate|
If you have purchased a private property, such as a condominium, and it was put up for an en-bloc within three years of the purchase, you are still liable to pay the SSD.
This is regardless of whether or not you agreed to the en-bloc. If paying the SSD would cause you a financial loss in this situation (as you would make less from the sale than you originally paid for the unit), you can represent your case to the Strata Titles Board.
It is probable that what you heard about was the transfer of the Option to Purchase (OTP). For a brief time, it was possible to add the names of subsequent buyers on the OTP, and then transfer the OTP (but not the house, thus evading stamp duties on the resale). That loophole has since been closed, and any information lingering about this is now obsolete.
Finally, there is GST payable on commercial properties, for commercial properties, you do have to pay the usual GST. At the time of writing, this is set at 7% of the higher of the purchase price or valuation.
Still confused or worried about stamp duties?
A mortgage broker doesn’t just show you the best home loan rates offered by major banks in Singapore for your housing loan. They’re also familiar with the property market, specific rules and regulations and can advise you further for your new property purchase. If you have any inquiries regarding your property purchase, please reach out to us! Our DollarBack Mortgage consultants will be more than happy to assist you.
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