Buyers Stamp Duty In Singapore

The title of ownership is proven by the contents of an official registered document. 

So if you buy a property, the only thing that proves you are the owner is this ownership document. 

The buyer’s stamp duty is the tax charged on that particular ownership document. 

So, naturally, it is charged on any purchase and sale agreements, as well as tenancy agreements. 

We know what you’re thinking; do I have to pay for this? What if I just ignore it and keep it a secret from everyone?

Well, if that’s your game, things could get really bad for you. 

First of all, ignoring to pay the Buyer’s stamp duty makes the ownership document useless. 

This is because all property documents must be officially registered by law.

Second of all, if there is a legal dispute with your property, you will not be able to use your documents to prove your ownership. 

This is because only documents with paid BSD will be recognized as legal. 

So it is definitely in your best interest to pay the BSD as promptly as possible. 

Stamp duty is determined either by the purchase price of the subject property or the market value of the same, whatever is higher. 

If you buy a second property, then the Inland Revenue Authority of Singapore is liable to charge an additional buyer’s stamp duty or ABSD.

This includes residential properties, such as HBD flats, individual residential units such as condominium units, terrace houses, semi detached-houses, or any vacant land. 

BSD is payable by the beneficial owner and is charged even when buying resale properties for investment purposes, such as the purchase of a resale flat. 

Additionally, BSD is payable for commercial properties, such as shops and offices, and industrial properties like factories. 

The Buyer’s stamp duty can be calculated by applying the official deductible rates depending on the property type. 

Below are the rates for the BSD in the case of residential properties. 

For the first $ 180,000, payable stamp duty is at 1 %. 

For the second $ 180,000, it becomes 2 %.

For the next $ 640,000, it becomes 3 %.

Finally, any amount beyond that will be charged at 4 %. 

To understand things better, let us take the example of Ethan and calculate the BSD payable for his $ 1.2 million condos. 

(1% of first $180,000 = $1,800) + (2% of next 180,000 = $3,600) + (3% of the next $640,000 = $19,200)+(4% of remaining $200,000=$8000)= $32,600. 

So by our calculations, the BSD amount payable, which Ethan does NOT have, is $32,000. 

Alternatively, if the property price or market valuation is $1 million or less, we use the following formula instead.

(3% of price or valuation) – $5,400

When it comes to non-residential properties, the BSD rates are as below.

For the first $ 180,000, payable stamp duty is at 1 %.

For the second $ 180,000, payable stamp duty is at 2 %.

For the remaining amount, payable stamp duty is at 3 %. 

But wait, what about properties that are both residential and commercial at the same time? 

It might be a shop with living quarters attached to it, or it could be a residential unit with half of the property being temporarily approved for non-residential purposes. 

Let us look at how the BSD rates are calculated in each case. 

For properties with mixed purposes, such as a shop with living quarters, there will be two different rates of BSD applied. 

The residential section will be treated as a separate property from the commercial sections. 

So, the residential BSD rate will apply to the living quarters and the commercial BSD rate for the non-residential component, i.e. the shop. 

For properties that have been temporarily approved as non-residential, it depends on the zoning classification of the land. 

If the land has been zoned as residential land, the property will have to use residential BSD rates despite being used for commercial purposes. 

It is important to note that all calculations for BSD are rounded down to the nearest dollar and are subject to a minimum duty of 1 $. 

So during the calculation, an amount of say, 67 cents, will be rounded up as 1 $.

All kinds of stamp duty are payable directly to the Inland Revenue Authority of Singapore. 

You can make these payments physically on one of the E-terminals or pay online via the IRAS e-stamping portal. 

This came after an announcement that stated that the top marginal BSD rate would be increased from 3 % to 4 % on residential properties exceeding $ 1 million in value.

This revised rate was supposed to be applied for purchases made on or after the 20th of February 2018. 

But what about those people who bought their property beforehand? Did they also have to pay the revised rates?

That’s where the transitional provision came into play. 

According to the law, this transitional provision was granted in cases where the seller had given the option to purchase (OTP) on or before the 19th of February. 

Amongst those cases, buyers who opted to purchase the property within 3 weeks of the announcement of new BSD rates, or the validity period of the OTP, whatever is earlier. 

So, the buyers eligible for the provision only had to pay the previous stamp duty rates for residential properties, provided they met the given criteria. 

Therefore, such a buyer would only have to pay the following rates.

1 % for the first $180,000

2 % for the second $180,000

3 % for the next $ 380,000 or exceeding amount (Instead of $ 640,000)

As you can see, those buyers eligible for the transitional provision did not have to pay the additional 4 % included in the revised rate. 

Manner of Acquisitions

The buyer’s stamp duty is payable on the following types of property acquisition.

BSD is payable if the property was acquired by making a purchase, i.e. by accepting the option to purchase or by sale and purchase agreement.

BSD is payable If the property was acquired as a gift, including a voluntary declaration of trust and settlement. 

In the case of a trust that does not change the property’s beneficial interest, there is a minimum duty of $ 10, which is fixed. 

However, if there is a change of beneficial interest in the property, the full stamp duty will be payable. 

This can be ABSD, SSD, or BSD, whatever is valid. 

BSD is payable if the property is acquired by its distribution due to the winding up of a company. 

BSD is payable when the property is acquired from the estate of a deceased individual, and the distribution of said property is not according to the will, intestate succession act, or Muslim inheritance law. 

Finally, BSD is payable if the property acquisition resulted from the trust under a renunciation of an interest in the residential property held under a bare trust. 

When there are multiple properties acquired through an En-bloc purchase,  the stamp duty will be calculated on the total purchase price of the properties if there is a single contract for all purchases or if the buying of those properties is conditional on one another. 

Suppose there is a single contract for buying multiple properties, followed by the existence of multiple documents for each of the properties.

In that case, only the single contract will be liable for stamp duty on the total purchase price. 

In case of purchases conditional on one another where there are multiple documents available, only one of these documents needs to pay stamp duty based on the total of all property prices. 

However, there are other forms of stamp duty called Additional Buyer’s stamp duty and is payable by Singapore citizens (only from second property purchase), Singapore Permanent residents, foreign nationals, and corporate entities at the viable ABSD rates. 

The ABSD was introduced to prevent private housing prices from skyrocketing; hence it is considered a cooling measure to regulate the private housing market.

Like the BSD, the payable ABSD is determined by the property’s purchase price or market value, whatever is higher. 

Let us look at the applicable ABSD rates to understand the subject better. 

Singapore Citizens don’t have to pay ABSD on their first property; however, they have to pay 12 % for the second and 15 % for the third and subsequent purchases.

Singapore permanent residents will pay 5 % on the first property and 15 % on the second and subsequent properties.

Foreign nationals will have to pay a flat 15 % ABSD rate on all property purchases; however, citizens from certain countries, such as the United States of America, are exempt from paying any ABSD. 

Entities, such as corporate companies will pay a flat 25 % on all property purchases. 

If the entity happens to be a housing developer, the ABSD rate will be charged at 30 % of all property purchases. 

But wait, it isn’t just the buyers who have to pay stamp duty. 

There is a tax called Seller’s stamp duty (SSD) which is payable by anyone who sells their property within the 3 -year holding period. 

Additionally, any property acquired through a transfer as a result of an inheritance or divorce will be applicable for SSD. 

However, it is common for the tenant to bear the responsibility of paying stamp duty unless it has been agreed otherwise by both parties. 

Whoever pays the stamp duty should collect the stamp duty certificate from IRAS to prove that the total amount has been paid.

Example of a Part Residential and Commercial BSD

As mentioned earlier, a property that is part residential and part commercial will have separate BSD charges for both aspects.

For example, let’s say Ethan somehow managed to save enough money to buy a large plot of vacant land for $18 million.

The land has been zoned as both residential AND commercial, so both BSD rates are applicable here. 

Let’s assume that the value of the residential portion is $ 5 million while the commercial portion is $ 13 million. 

For the residential portion, the BSD will be 1 % of the first $ 180,000, which is $ 1,800 ; 2 % for the second $ 180,000, which is $ 3,600; 3 % of the next $ 640,000, which is $ 19,200 and finally 4 % of the remaining $ 4 million, which is $ 160,000. 

So in total, the BSD payable for the residential portion valued at $ 5 million is ($ 1,800+$ 3,600+$ 19,200+ $ 160,000)= $ 184,600.

For the commercial component, the BSD will be 1 % of the first $ 180,000, which is $ 1,800; 2 % of the second $ 180,000, which is $ 3,600 and 3 % of the remaining $ 13 million, which is $ 390,000

So in total, the BSD payable for the commercial component valued at $ 13 million is ($ 1,800+$3,600+$390,000)= $ 395,000.

Therefore, the combined BSD payable on the full property of $ 18 million, is ($ 184,600+ $ 395,000) = $ 579,600.

Its main objectives are to prevent property prices from exploding and to ensure that price rises are in line with economic fundamentals. 

ABSD is payable by all Singapore Citizens from their second residential property onwards. 

Singapore permanent residents will have to pay ABSD on first, second, and subsequent residential properties, while foreign nationals and entities are liable to pay ABSD on any property purchases.

If the property documents were signed in a foreign country, the BSD and ABSD are payable within 30 days after the signed agreement has reached Singapore. 

Failure to pay the BSD or ABSD on time will generate a late payment penalty. 

If the payment is 3 months late, the penalty will be either 10 $ or an amount equal to the payable BSD or ABSD, whatever is higher. 

If the Payment is more than 3 months late, the penalty will be either 25 $ or an amount equal to the payable BSD or ABSD, whatever is higher. 

Moreover, IRAS can appoint your tenant, lawyer, employer, or bank to pay on your behalf. 

What’s more, IRAS can take legal action against you if you refuse to pay the outstanding amount. 

Whatever be the case, they will recover the payable stamp duty under any circumstance.