Additional Buyer’s Stamp Duty (ABSD)
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Want to buy a second apartment? You might be liable to pay Additional Buyer’s Stamp Duty.
Introduction
Going on a property buying spree in Singapore might turn out to be costlier than you anticipated.
This is because of the additional buyer’s stamp duty imposed by the Singapore government as a cooling measure.
We know what you’re thinking, additional buyers stamp duty? Didn’t I already pay the stamp duty?
While it’s true that you may have already paid the well-known buyer’s stamp duty, that doesn’t absolve you from paying ABSD.
In fact, ABSD is charged on top of the payable buyer’s stamp duty, hence the word ‘additional’.
Why was this imposed? Well, that’s a complicated affair.
If you don’t know already, Singapore is a city-state with a limited amount of land and residential properties.
To put things into perspective, the total landmass of Singapore is a mere 728.6 km².
Let’s compare that to the landmass of the United States of America which is 9.834 million km².
Now, do you understand the situation?
Despite this undeniable fact, the rate of residential property purchases in Singapore is always at an upwards momentum.
This could even be observed during the COVID-19 situation when the economy was in bad shape.
Needless to say, this makes it difficult to ensure the availability of vacant land and residential properties.
Since that is the case, it can be understood that each and every piece of property is extremely valuable and limited.
Therefore, it is in the best interest of the government to ensure the availability of such properties to those who need them.
Simply put, if you as an individual own around four apartments, you’re taking up the space of three families who might need it more than you.
But of course, buying multiple apartments is your legal right, and the government cannot prevent you from doing so.
This becomes a conundrum.
So, to balance the private housing market, the government introduced the additional buyer’s stamp duty which is chargeable on your 2nd property or subsequent property purchase thereafter.
This was also done in the hopes to control the rising property prices due to exuberant property purchases.
All those purchases ultimately add up to the demand in the market, thereby increasing price.
Moreover, outstanding housing loans owed by a large portion of buyers also contribute to the price rise.
What is Additional Buyer’s Stamp Duty (ABSD)?
Additional buyer’s stamp duty is a payable charge for all Singapore citizens who already own a home, but decide to purchase a separate property for residential purposes.
Moreover, Singapore Permanent Residents and foreigners are liable to pay ABSD even on their first residential property purchase.
This was introduced as a cooling measure to balance the economic impact of broad-based demand for housing assets in Singapore, which ultimately affect private housing prices.
ABSD can act as a measure to reduce the transaction volumes and balance the rate environment.
Keep in mind this includes the rate for entities as well as individuals.
The term additional buyers primarily refer to those individuals who are buying additional residential properties.
It signifies the fact that these individuals will be subject to additional stamp duty charges on those purchases.
In essence, ABSD is an addition to the payable buyer’s stamp duty.
ADSB applies to all residential properties such as condominium units, terrace houses, semi-detached houses and of course, HBD flats.
Moreover, residential properties with mixed purposes such as strata shop units, shops with living quarters and ground floor shops are all chargeable for ABSD.
To be clear, the ABSD is charged on all residential properties and units of housing accommodation irrespective of what you are using it for.
For example, you will still have to ABSD if you buy a third residential property for investment purposes.
This includes resale flats and the sale of housing units.
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What is the current ABSD rate?
The current ABSD rates are different according to the purchasing individual, entity, or type of purchase made.
To start, let us take a look at the average Singapore citizen’s ABSD rate type.
Singapore citizens buying their first residential property will be exempt from paying any ABSD rate on the purchase.
A Singapore citizen’s second property purchase will be subject to an ABSD charge of 17 %.
This charge is determined by either the market value of the property or the purchase price, whatever is higher.
The applicable ABSD for the third and subsequent property will be at 25 %.
A Singapore permanent residence’s first property purchase will be subject to a 5 % ABSD charge.
Meanwhile, the second property is charged at 25 %, while the third and subsequent property is charged at 30 %.
Foreigners buying any property whatsoever, be it the first, second or third, are charged with 30 % ABSD.
The ABSD chargeable for companies on the purchase of property is 35 %.
However, there is an additional 5 % charge for housing developers, which puts the aggregate ABSD rate at 40 %.
It is also important to note that the ABSD rate package can increase in the future depending on the condition of the property market.
Who Needs to Pay ABSD?
ABSD is payable by any Singaporean citizen on the second and subsequent property purchases.
It also applies to permanent residents of Singapore for the first, second and subsequent purchases.
Moreover, foreigners and entities are also required to pay ABSD on any property purchase.
Additionally, anyone who purchases property on trust is also liable to ABSD charges.
Finally, housing developers or anyone in the business of housing development or members of the housing board are also liable to pay ABSD.
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When do I have to pay ABSD?
You are supposed to pay the ABSD within 14 days of the sale and signing of the purchase agreement.
In case the agreement was signed overseas, there is a 30-day extension which starts after the agreement is received in Singapore.
Why Was ABSD Introduced?
As briefly mentioned earlier, the ABSD was introduced to balance the ever-growing demand for residential properties.
The ABSD is a cooling measure to mitigate rising prices and keep them affordable for Singaporeans.
ABSD Remission for married couples
Certain remission conditions can apply to specific situations of property purchase.
For example, full ABSD remission is valid if a married couple, with at least one Singaporean citizen, buys their first residential property together.
Note that neither partner should currently own any residential property at the time of the purchase for the ABSD to apply.
ABSD remission is also available for couples with at least one Singaporean citizen on the purchase of their second property together.
However, they will have to sell their first property within 6 months of buying the new property.
Additionally, house developers may also qualify for remission for development purposes.
In the case of a foreign spouse gaining Singapore citizenship, the citizenship status must have been given before the time of purchase for ABSD remission to apply.
Are there any ABSD Exemptions?
Absolutely, there are specific cases where the payment of ABSD is exempted.
As you know, Singaporean citizens are only liable to pay ABSD for the second and subsequent residential property purchases.
So, a neat way of avoiding ABSD is to maintain the status of a first-time buyer.
Couples can achieve this by using only one person’s name in the initial purchase, leaving the other person free of property count.
Alternatively, they can also choose to decouple and transfer the ownership of the initial property to one spouse, so that the other spouse is free.
In a situation where you are purchasing a second property, but have already sold your first property, your status will revert to a first-time buyer.
This essentially removes any obligation to pay ABSD.
Foreigners from the United States of America, Liechtenstein, Norway, Switzerland and Iceland are exempt from paying ABSD on their first property purchase.
Finally, ABSD may be exempt if you buy a dual-key property with multiple units of living space.
Buying someone else property: How does ABSD Work?
If you’re buying property to gift someone else who does now already own a residential property, for example, your child (above 21 years old), will remove any obligations for paying ABSD.
Are there any penalties for late ABSD Payment?
It is important to note that any responsibility related to stamp duty purposes should be handled as soon as possible.
Failure to meet the given deadlines will result in penalties.
If you make a late payment of ABSD with a delay of fewer than 3 months, there will be a penalty issued for the late payment.
The penalty will be $ 10 or an equal amount to the payable duty, whatever is greater.
If there is a late payment of ABSD that exceeds 3 months, the penalty will be either 25 $ or four times the payable duty amount.
(The greater of the two will be selected)
Can we Avoid paying ABSD?
The payment of ABSD can indeed be avoided in several specific circumstances.
- You can avoid paying for ABSD by always maintaining your first-time buyer status.
This can be done by selling your previous property before buying the next one, thereby always being a first-time buyer. - If you are a couple having joint ownership of the first property, you can choose to decouple and transfer the full ownership to one member of the relationship.
This leaves a second member free from owning any property, thereby becoming a first-time buyer yer again. - You can avoid paying ABSD by only buying commercial or industrial properties as opposed to residential ones.
- ABSD will not be applicable if you buy the property in someone else’s name. For example, your child of 21 years or above.
- Foreign nationals from the USA, Norway, Iceland, Switzerland and Liechtenstein do not have to pay ABSD for the first property.
