What Is the Additional Buyer’s Stamp Duty (ABSD) and How Can You Avoid It?

Additional Buyer’s Stamp Duty (ABSD) and How can you Avoid It?

Property owners looking to invest in a new property they could sell in the future might already be aware of the ABSD, a tax Singaporeans are charged for the purchase of any residential property if they already own another residential property (or if they are not Singaporean citizens). But for those not in the know, here’s what it really means.

Imagine being able to purchase as many properties as you want and reselling them at a greater value without limitations. Wouldn’t that be the dream investment for all, to just pick any ideal property and earn back much more than what they are truly worth? Now imagine the entire of Singapore filled up with properties sold at such a high price by a small group of super-rich tycoons. Those tycoons would surely possess great financial power and the property market would surely tip in their favor, wouldn’t it? They would be capable of doing whatever they want with such properties, selling at any price they like.

Everything in life requires balance, and property investment is no different. Therefore, to avoid such an economic fluctuation, Singapore introduced the Additional Buyer’s Stamp Duty (ABSD) to ensure that no one shall easily acquire such tremendous economic power.

All Singaporeans already in possession of a residential property shall pay 12% of the purchase price for their next property and a 15% charge for their third and subsequent properties. Singapore Permanent Residents (SPR) and foreigners, on the other hand, shall pay a far steeper price of 5% and 20% for their first residential purchase respectively. For subsequent properties, it would be 15% for PRs and 20% for foreigners. 12% might just seem like a number, but imagine if you would like to purchase a property costing a million dollars; that means you would have to pay an extra 12% of one million, or $120,000. That’s a lot to pay for an investment, therefore controlling any balance-tipping for the foreseeable future.

So does that mean there is no fruitful investment in the business of property purchase? Don’t fret, for there are ways to bypass such a restriction. There always are.

There is a term among buyers called “decoupling.” See, in order for Singaporeans to purchase a residential property, you would have to be either married or 35 years old and above. For those of the former category, they could simply remove a spouse from the ownership of their first property should they wish to acquire another. In other words, one among the couple would no longer be in possession of a property and would be free to purchase another without paying extra.

Naturally, such a bypass does require two steps:

1. A Lawyer. Yes, unfortunately, you would need a lawyer earning off your hard-earned money in order to prepare the appropriate forms for the decoupling to happen and subsequently register said forms with the Singapore Land Authority (SLA).
2. Part-Purchase of One Spouse’s Share in the Property. In short, it merely means you have to officialize the transfer by having your spouse purchase all the shares you owned for the property you are transferring. Since both you and your spouse purchased your first property together under both of your names, your spouse has already owned part of the property, hence the name.

   While straightforward, the official purchase part of the bypass does require a few more steps:

   1. Sale and Purchase of the Ownership: Again, very straightforward. You just have to sell the ownership of the property to your spouse via an official agreement.
   2. Stamp Duties: Even with ABSD aside, your spouse do still have to pay the BSD (Buyer’s Stamp Duty), which is 50% of the first property’s price. If the property was purchased up to less than three years ago, you will have to pay for the SSD (Seller’s Stamp Duty) as well, which is a rate of 4% minimum to a maximum of 12% of the property’s price depending on the property’s original purchase date.
   3. Refund of CPF Monies: Any amount of CPF you have used in purchasing the first property would have to be refunded to your CPF account together with accrued interest. Your lawyer will handle this little inconvenience for you.
   4. Restructuring Bank Loan: Remove your name from the loan you might have used to purchase the first property and place it under your spouse’s name – that’s all it means. So not only are you transferring the ownership of a property, you would be transferring all the debts that come with it as well. Do keep that in mind.

And it’s that simple! Now you are free to invest in any subsequent properties without these Additional Buyer’s Stamp Duty (ABSD) charges to weigh you down and keeping you oppressed! Go out there and earn some big money!