Seller’s Stamp Duty

Want to sell your property? Not so fast, the taxman is coming to collect his share! Learn all about Seller’s stamp duty and why you need to pay it. 

How to Pay Sellers Stamp Duty
Stamp duty on transfer of shares

Introduction

Say you bought a house in Singapore for the sole purpose of selling it off once the market valuation increases. 

After all, it’s a common practice done by millions of property sellers worldwide and a great way to make a profit. 

However, Singaporeans might find that exploiting the loopholes in the property market is easier said than done. 

That’s because of the Seller’s stamp duty imposed on anyone who sells their property within 3 years of purchase. 

While most of us might look upon this with disdain, we have to understand the fundamental reason why the SSD is levied in the first place. 

The main objective of the tax isn’t to stop people from making a profit; it is to safeguard the interests of the country as a whole. 

Unlike in other developed nations, exploitation of the property market is almost non-existent in Singapore. 

We can confidently say that property prices in Singapore are kept in check with economic fundamentals.

Why is that? Well, it’s because of the Seller’s Stamp Duty.

Other fees you can expect to pay

What is Sellers Stamp Duty

To understand Seller’s Stamp Duty, we must first discuss what stamp duty is in the context of the property market in Singapore. 

Stamp duty is a type of property tax levied on the purchase, sale or transfer of physical properties in Singapore. 

This may include resale properties, residential properties, industrial properties etc. 

Alternatively, there may be cases which are non-related to the sale or purchase of property, such as stamp duty of lease of residential property. 

In such cases, the tenant will have to pay the lease duty and the rates will be applicable depending on the lease period. 

Moreover, a mortgage duty is applicable in the case of mortgages and home loans. 

The normal rate for the mortgage duty payable is 0.4 % of the loan amount granted for the loan.

The payable amount of duty for housing loans is capped at $ 500 irrespective of the type of housing loan or mortgage equity loan with or without any other outstanding loan. 

Alternatively, the payable duty on commercial property is different from that of a residential property and is subject to different rates. 

Now, coming to the main topic, the Seller’s Stamp Duty is a form of stamp duty payable when a property seller sells their property within 3 years of the holding period. 

SSD applies to any residential or industrial properties and is subject to various applicable rates. 

Residential properties include residential flats, executive condominiums, houses, or lands zoned as residential, while industrial properties include showrooms, Laundromats etc. 

The amount of SSD payable is determined by the selling price/purchase price or the market value of the concerned property, whatever is higher. 

It is also important to note that SSD is applicable during En-bloc sales, regardless of whether or not you opt to sell. 

In other words, if the majority of flat owners decide to sell the entire building, despite your objections, you will still have to pay SSD tax for the sale. 

Seller’s stamp duty was first introduced in Singapore around 2010 as a cooling measure to curb the rampant flipping of residential properties. 

This means that property sellers looking to sell their residential property before the 3 year holding period will be subject to the tax.

The exact amount of the SSD payable will be determined by the different rates valid in Singapore. 

Although most Singaporeans find this incredibly annoying, we must understand why this is necessary. 

Singapore isn’t the only country where the Seller’s stamp duty is valid, but it may be the country with the highest rates. 

Let’s take the example of the USA, particularly the state of California, which is facing one of the biggest housing crises in the world today. 

California imposes a universal SSD rate of $ 1.10 for every $ 1000. 

So, a house sold for $ 1 million only has an SSD of $ 1000, irrespective of whether the property is sold within a year or after 3 years. 

Because the payable rate is so low, there are rampant cases of real estate agents making huge profits by flipping property, which ultimately drives the prices up, resulting in a housing bubble. 

This has gone completely unchecked by the authorities, making affordable housing in California completely non-existent. 

Meanwhile, the applicable SSD rates in Singapore are much higher and reflective of the residential property market. 

A property seller will have to pay 12 % if they decide to sell within 1 year of buying the property. 

So, if a flat is sold at $ 1 million, the amount of SSD payable will be $ 120,000. 

This will dissuade people from practising wide-scale flipping, which as a result, will safeguard the property prices in Singapore.

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What are the SSD Rates

When you need to pay Sellers Stamp Duty

Seller’s stamp duty is payable by the property transfer pursuant when he/she sells the property within 3 years of its purchase. 

This leaves us with the question, how do we determine whether or not a property is deemed residential upon which stamp duty is to be levied?

Well, according to IRAS, Stamp duty on residential property is levied on any acquisition or disposal of flats, an entire building or parts of, when the property is used for residential or mixed purposes.

The applicable SSD rates are determined by the exact timeframe when the property was sold within the 3-year holding period. 

If the property was sold within or up to 1 year of purchase, the applicable rate will be 12 %. 

If the property was sold after a 1 year holding period but did not exceed 2 years, the rate will be 8 %.

If the property was sold between 2 to 3 years of purchase, the rate will be 4 %.

HBD flats are the only flat type which is exempt from SSD, as they can only be sold after 5 years of purchase.

Other than HBD flats, there may be various scenarios where you are exempt from paying the extra toll. 

To put it simply, SSD is not payable when-

  • When the Government acquires residential properties under the Land Acquisitions Act.
  • When residential properties are sold due to bankruptcy or involuntary winding up of assets. 
  • When residential properties developed by licensed housing developers under the Housing Developers Act, are sold. 
  • When residential properties are sold by public authorities such as HBD or JTC due to exercising their duties. 
  • When foreigners sell their residential properties under the residential properties act.
  • When residential properties are returned to HBD due to repossession by HDB.

How to calculate Sellers Stamp Duty in Singapore

As we mentioned earlier, SSD is levied on residential properties sold within the 3-year holding period. 

So the first thing we have to do is determine the holding period of the property, which we can do by finding out the property’s actual date of acquisition. 

The property’s actual date of acquisition can refer to the following-

  • The date when you accept the Option to Purchase (OTP) unless the OTP is only valid after the signing of the agreement or the actual execution of the transfer.
  • The date when you accept the sale and purchase agreement.
  • The date when you agree to the lease of a new HBD flat.
  • If the above options are not valid, then the actual date of property transfer will be taken as the date of acquisition.

It is important to note that there might be some particular cases where the date of acquisition is calculated differently.

For example, In the case of property transfer pursuant to a divorce, the acquisition date will be considered as the date when the marriage ended or when the interest for property transfer was acquired by the person, whatever is later. 

In the case of property transfer pursuant to inheritance, the acquisition date is considered the date when the deceased had acquired the interest in the property.

Meanwhile, the earliest date of acquisition will be valid for cases of transfer of HBD flat within the family. 

Finally, what we have to do now is determine the actual date of sale or property disposal. 

It can be the date when the option to purchase by the buyer was accepted to the seller’s offer to sell unless the option is only valid upon the signing of the agreement or the actual execution. 

Alternatively, it can also mean the actual date of sale and purchase agreement or the transfer date. 

Note that the holding period is the actual time period between the acquisition date and the property’s sale or disposal date. 

The SSD amount is determined by applying the relevant rate on the market value or selling price (Whatever is higher) and is rounded down to the nearest dollar. 

There are some exceptions to this rule; for example, if the property was bought in parts at different times, then the holding period for each part will be calculated separately using the respective dates of acquisitions. 

If the property is only partially residential, the SSD will only be payable on the residential portion of the property. 

So, now that we have all the nitty-gritty details done with, let’s take a look at an example of how the SSD is actually calculated. 

Let’s say you bought your residential property on 30th June 2019 and sold it on 21st May 2020. (Within one year)

The property’s purchase price is $ 1,400,000 while the market valuation is $ 1,200,000. 

This means that 12 % SSD rate will be applicable to $ 1,400,000; 12 % of $ 1,400,000 is $ 168,000. 

Now let’s say that you sold the property on 13th April 2021; that would mean you sold it after a holding period of more than 1 year but less than 2 years. 

So, in this case, the amount payable will be 8 % of $ 1,400,000 (Assuming that the market value is still lower)= $ 112,000.

Alternatively, if you sell the property after holding it for more than 2 years but less than 3 years, the amount payable will be 4 % of $ 1,400,000 = $ 56,000

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What is seller stamp duty

How to Pay Seller’s Stamp Duty?

Payment for stamp duty must be made within 14 days of executing the sale contract; any cases of late payment will be met with a chargeable penalty. 

You must pay the full amount during the initial payment itself without resorting to paying in instalments. 

Property stamp duties can be paid via the e-stamping portal, IRAS Taxpayer e-Terminals or at designated SingPost offices. 

You can pay the SSD using several modes of payment such as eNETS, AXS, FAST and GIRO or payment via fund transfer. 

Don’t forget to collect the payment slip as proof!

Other fees you can expect to pay when selling your property in Singapore

One thing you shouldn’t forget is that there might be additional fees you have to pay separate from the SSD. 

Most of it consists of your property agent fees, conveyance lawyer fees and any costs for moving or renovation. 

You will also be liable to pay for property tax and any fees regarding the upkeep of the property until the sale of the property has been completed.

How Much You Have To Pay If You Sell Your Property Within 3 Years

What are the SSD Rates?

As per the latest changes made to the SSD framework on 11th March 2017, the applicable rates are as follows

12 % for properties sold within 1 year of the holding period, 8 % for properties sold after 1 year and up to 2 years, and 4 % for properties sold between 2 to 3 years of the holding period. 

Needless to say, properties sold after 3 years of the holding period are not subject to Seller’s Stamp Duty. 

Meanwhile, industrial properties are subject to different rates.

The applicable rate is 15 % if sold within 1 year, 10 % if sold between 1 to 2 years, and 5 % if sold between 2 to 3 years. 

Note that the SSD is not applicable on DBSS flats or HBD flats as they cannot be sold within 5 years of purchasing the property.

How Much You Have To Pay If You Sell Your Property Within 3 Years

As we mentioned earlier, the SSD rates applicable are 12 %, 8 % and 4 %, depending on when exactly you’ve sold your property. 

So let us take an example to determine exactly how much the payable amount will be, depending on the holding period. 

Let’s say that a property purchase of $ 1.2 million was made for a flat which was then sold off again within 1 year.

The exact SSD payable here will be 12 % of $ 1.2 million which is $ 144,000.

If the flat was sold between 1 to 2 years of purchase, the seller would have to pay 8 % on $ 1.2 million, which is $ 96,000.

If the flat was sold between 2 to 3 years of purchase, the seller would have to pay 4 % on $ 1.2 million, which is $ 48,000.

Finally, flat sellers selling their property after 3 years will not be subject to any Seller’s stamp duty. 

Stamp duty on transfer of shares

Stamp duty on the transfer of shares is determined by charging 0.2 % of the purchase price or the actual price valuation of the shares and is usually charged to the buyer of the shares. 

An exception for the stamp duty rule is made for any shares listed on the Singapore Stock Exchange; meaning no stamp duty is levied on the purchase or sale of such shares.

Recent changes to the stamp duty regime in Singapore

Here’s a quick update if you haven’t been keeping up with the latest property news. 

Financial prudence is the newfound objective, as the central bank urges prudence among property purchasers.

The reason isn’t so that you can have a rare property portfolio, but rather to keep a check on the rising prices amongst properties for sale. 

Stamp duty rates have also seen a change in the more recent years.

For example, Additional Buyer’s Stamp Duty (ABSD) saw many changes as of July 2018. 

Foreigners making their first and subsequent residential property purchases saw a 5 % increase in ABSD, which changed the rate from 15 % to 20 %.

Permanent residents of Singapore saw no change in the ABSD rate for their first property. 

However, Singapore permanent residents will have to pay 5 % more for second and third property purchases, which changes the ABSD rate from 10 % to 15 %. 

Similarly, Singapore citizens buying their second property will have to pay 12 % ABSD instead of the previous 7 %, while those buying their third or subsequent properties will have to pay 15 % instead of the previous 10 %.

Buyers who are not married couples – Can a single purchaser also qualify for the ABSD remission on the purchase of a second residential property if the conditions are met?

No, The remission is only valid for married couples and does not extend to single buyers, parent and child groups, or sibling groups. 

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