How can I avoid paying ABSD in Singapore?
Incurring Additional Buyer's Stamp Duty (ABSD) can increase the cost of home ownership in Singapore. Here’s how you can legally avoid paying ABSD
By Priscilla Lee -
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If you are looking forward to investing in a second or third property in Singapore, your cost of home ownership has just become more expensive. Since April 2023, the Singapore government has imposed a higher Additional Buyer’s Stamp Duty, also known as ABSD, to promote a more sustainable property market and curb the rising property prices.
ABSD vs BSD
Additional Buyer's Stamp Duty vs Buyer's Stamp Duty
Bear in mind that ABSD is on top of the regular Buyer’s Stamp Duty (BSD) that is applicable for all property transactions and it can easily bump up your total property cost by another 20% to 65%.
Do not put down a downpayment on your next home until you read this blog. We will guide you through what Singapore’s BSD and ABSD are all about and how you can legally avoid incurring the latter.
Source: Unsplash
Buyer’s Stamp Duty (BSD) in Singapore
Buyer's Stamp Duty (or commonly called BSD in Singapore for short) is a form of tax you need to pay when you acquire any property in Singapore. It is levied on all purchases of property and an extra cost for home ownership no matter if you are buying an HDB flat, private condominium or commercial property in Singapore.
BSD is computed based on the purchase price or market value of the property, whichever is the higher amount. As of 15 February 2023, the Buyer's Stamp Duty (BSD) rates in Singapore are:
| Property price or market value | BSD rates for residential properties from 15 Feb 2023 |
|---|---|
| First $180,000 | 1% |
| Next $180,000 | 2% |
| Next $640,000 | 3% |
| Next $500,000 | 4% |
| Next $1,500,000 | 5% |
| Remaining amount | 6% |
How to calculate Buyer's Stamp Duty (BSD)?
Say, if you intend to buy an HDB flat in Singapore at $500,000, you must factor in BSD as part of the extra costs and fees you need to pay. The amount of BSD payable will look like this:
| Property price or market value | BSD rates for residential properties from 15 February 2023 | BSD payable |
|---|---|---|
| First $180,000 | 1% | $180,000 x 1% = $1,800 |
| Next $180,000 | 2% | $180,000 x 2% = $3,600 |
| Next $640,000 | 3% | $140,000 x 3% = $4,200 |
| Next $500,000 | 4% | - |
| Next $1,500,000 | 5% | - |
| Remaining amount | 6% | - |
| Total BSD payable | $9,600 |
Source: Unsplash
Additional Buyer’s Stamp Duty (ABSD)
ABSD was first introduced in 2011 and revised in 2013, then in 2021. The latest round of ABSD rate revision in Singapore was made on 27 April 2023 to further cool down the soaring property market in Singapore.
ABSD vs BSD
Unlike BSD which is taxable on all property purchases, ABSD is levied only when:
- Singaporeans buy second or subsequent property
- Singapore Permanent Residents (SPRs) buy first or subsequent property
- Foreigners buy first or subsequent property
- Official entities, trustees and developers buy any property
Currently, the Additional Buyer's Stamp Duty (ABSD) rates in Singapore are as follow (from 27 April 2023):
| Buyers’ Citizenship | ABSD rates before 26 April 2023 | ABSD rates from 27 April 2023 |
|---|---|---|
| Singaporean buying first residential property | None | None |
| Singaporean buying second residential property | 17% | 20% |
| Singaporean buying third and subsequent residential property | 25% | 30% |
| SPR buying first residential property | 5% | 5% |
| SPR buying second residential property | 25% | 30% |
| SPR buying third and subsequent property | 30% | 35% |
| Foreigner buying residential property | 30% | 60% |
| Entity or trustee buying residential property | 35% | 65% |
| Housing Developer buying residential property | 35% plus another 5% (non-remittable) | 35% plus another 5% (non-remittable) |
How to calculate Additional Buyer's Stamp Duty (ABSD)?
If you are a Singaporean buying a second property in Singapore at S$1 million, you will be liable to pay 20% ABSD instead of the previous rate of 17%. The amount payable is therefore:
$1 million X 20% = $200,000
Note that ABSD is calculated based on the valuation price or selling price, whichever is higher. As such, even if the property is valued at S$1 million but the seller decides to increase the selling price by S$300,000 more, you are liable to tabulate the final ABSD based on the higher price:
$1.3 million X 20% = $260,000
Source: Unsplash
How to Avoid Paying ABSD in Singapore?
ABSD levied on any Singapore property can easily run into the hundreds of thousands and this can make an otherwise smart property investment an expensive affair. Depending on your objective for buying a new property, there are some popular strategies that may help you to get around it.
1. Decoupling
Decoupling refers to the process of transferring ownership of a property from one party to another, typically between spouses or family members, without selling the property.
For example, if you and your spouse own a private property together but wish to invest in another without having to incur ABSD, you can consider transferring the ownership of the existing property to your spouse, then buy a second one with you as the sole owner.
However, do note that you and your spouse must be able to finance the property under your ownership independently. Decoupling is not legal for HDB flats.
2. Sell Existing Property Before Buying the Next
This is the most practical strategy because you will only hold one title deed in Singapore at any one time and will never be slapped with ABSD. This method also allows you to free up your funds and grant you more time to shop around for your next home.
The only fly in the ointment is the possibility of having to incur additional costs for taking out a short-term lease while searching for a suitable purchase. However, if you have friends or family with a spare room to help you tide over the period, this could be the ideal strategy.
Source: Unsplash
Apply for ABSD Remission
In some scenarios, IRAS does grant ABSD remission if you meet eligibility conditions. For starters, full remission may be applicable to married couples who purchase their first residential property jointly. The couple must include a Singaporean and both spouses must not own any residential property.
For couples who purchase their second property but dispose of the first within six months from the date of purchase of the second property may also be allowed to claim ABSD remission. This also applies to couples with a spouse who owns a property separately before buying another jointly as a couple.
This article first appeared on Value Champion.