Additional Buyer’s Stamp Duty (ABSD): What Is ABSD In Singapore and Updated Rates (2024)

Introduction to Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD) in Singapore

When purchasing property in Singapore, buyers are subject to various statutory costs, among which are the Buyer’s Stamp Duty (BSD) and the Additional Buyer’s Stamp Duty (ABSD). These duties represent significant financial considerations in the property acquisition process.

BSD is a mandatory tax levied on all property purchases in Singapore. Its rate is calculated based on the property’s purchase price or market value, whichever is higher. The tax is structured in tiers, with the percentage increasing as the value of the property escalates. Since February 2023, the top marginal rate for BSD stands at 6%.

ABSD, on the other hand, was introduced in 2011 as a cooling measure to regulate the residential property market. Its primary objective is to curb property speculation and manage price inflation. ABSD is applicable under certain conditions, such as when a buyer already owns a residential property or is a foreigner or a non-individual entity. The rates of ABSD have been subject to changes, reflecting the government’s responsive measures to the evolving property market dynamics.

The latest revision in April 2023 saw a notable increase in ABSD rates, especially for foreigners and entities. These adjustments are in line with the government’s strategy to prioritize housing affordability for its citizens and permanent residents while moderating investment-driven purchases by non-residents and entities.

Detailed Analysis of ABSD: Purpose and Impact on Property Market

The ABSD’s primary purpose is to deter speculative buying, which can lead to artificial inflation in property prices. This measure is particularly targeted at cooling the demand from certain segments of buyers, such as investors and foreigners, thereby ensuring a sustainable property market conducive to genuine home buyers.

Purpose of ABSD

The ABSD was introduced to curb a surge in property demand that was leading to rapid price increases. This speculative buying behaviour, if unchecked, could have resulted in a property bubble, making housing unaffordable for many Singaporeans. By imposing additional costs on specific categories of buyers, the ABSD aims to moderate such speculative investments.

Impact on the Property Market

The introduction of ABSD has had a substantial impact on Singapore’s property market:

• For Local Buyers: Singapore citizens buying their first property are exempt from ABSD, supporting their aspirations of homeownership. However, those purchasing second and subsequent properties face higher ABSD rates, which discourages the accumulation of multiple properties resulting in more available housing units for first-time buyers.
• For Permanent Residents and Foreigners: ABSD imposes a significant additional cost on non-citizens. This is especially true for foreigners, who are subject to the highest ABSD rates. This measure has successfully moderated foreign investment in Singapore’s residential property market, aligning it more closely with the needs of local residents.
• For the Overall Market: By reducing speculative buying, ABSD helps stabilize property prices. This stability is crucial for the long-term health of the real estate market, ensuring that it remains robust and sustainable.

The ABSD, in combination with other property cooling measures like the Total Debt Servicing Ratio and the Seller’s Stamp Duty, forms a comprehensive framework to regulate the property market dynamics in Singapore. These measures collectively aim to maintain a balanced market, preventing drastic price fluctuations and ensuring that the property market remains accessible to a broader segment of the population.

Updated ABSD Rates as of 2024: A Comprehensive Breakdown

As of 2024, the Additional Buyer’s Stamp Duty (ABSD) rates in Singapore have undergone significant revisions. These changes reflect the government’s ongoing efforts to fine-tune the property market, ensuring its stability and affordability. The following is a comprehensive breakdown of the ABSD rates applicable to different categories of buyers:

Singapore Citizens

• Buying 1st residential property: 0% ABSD
• Buying 2nd residential property: 20% ABSD
• Buying 3rd and subsequent residential properties: 30% ABSD

Singapore Permanent Residents (PRs)

• Buying 1st residential property: 5% ABSD
• Buying 2nd residential property: 30% ABSD
• Buying 3rd and subsequent residential properties: 35% ABSD

Foreigners

• Buying any residential property: 60% ABSD

Entities (including companies and associations)

• Buying any residential property: 65% ABSD

Trustees for any residential property

• ABSD Rate: 65%

Housing Developers (for any residential property)

• ABSD Rate: 35% (additional 5%; non-remittable)

These rates represent a substantial increase from previous years, especially for foreign buyers and entities. The high ABSD rates for foreigners, at 60%, and entities, at 65%, are designed to significantly curb speculative buying by these groups.

Calculating ABSD: Examples and Scenarios

Understanding the calculation of Additional Buyer’s Stamp Duty (ABSD) is crucial for anyone involved in the property market in Singapore. The ABSD amount is determined based on the property’s purchase price or market value, whichever is higher. To illustrate this, let’s consider a few examples:

Example 1: Singapore Citizen Buying a Second Residential Property

• Property Purchase Price: SGD 1.5 million
• ABSD Rate for Second Property (Singapore Citizen): 20%
• ABSD Amount: 20% of SGD 1.5 million = SGD 300,000

In this scenario, a Singapore citizen purchasing a second residential property at SGD 1.5 million would be required to pay an ABSD of SGD 300,000.

Example 2: Foreigner Buying a Residential Property

• Property Purchase Price: SGD 2 million
• ABSD Rate for Foreigners: 60%
• ABSD Amount: 60% of SGD 2 million = SGD 1.2 million

A foreigner buying any residential property in Singapore at SGD 2 million would incur a substantial ABSD of SGD 1.2 million.

Example 3: Singapore Permanent Resident Buying a First Residential Property

• Property Purchase Price: SGD 800,000
• ABSD Rate for First Property (PR): 5%
• ABSD Amount: 5% of SGD 800,000 = SGD 40,000

A Singapore Permanent Resident purchasing their first residential property at SGD 800,000 will have to pay an ABSD of SGD 40,000.

Joint Purchases and Mixed Profiles

In cases of joint purchases involving buyers with different profiles, the highest applicable ABSD rate is used. For example, if a Singapore Citizen and a foreigner jointly purchase a property, the foreigner’s higher ABSD rate will apply to the entire purchase price.

These examples highlight the significant financial impact of ABSD on property purchases, particularly for those buying a second or subsequent property, and for foreign buyers. Potential buyers should factor in these costs early in the planning stage of their property purchase.

Exemptions and Rebates: Understanding Who Qualifies

The Additional Buyer’s Stamp Duty (ABSD) framework in Singapore includes provisions for exemptions and rebates under specific conditions. These exemptions and rebates are crucial for buyers to understand as they can significantly reduce the financial burden in certain situations.

ABSD Exemptions

1. Singapore Citizens Buying Their First Residential Property: Singapore citizens are exempt from ABSD for their first residential property purchase.
2. Foreigners and PRs under Free Trade Agreements (FTAs): Nationals and Permanent Residents of certain countries, as per FTAs (such as the United States, Switzerland, Iceland, Norway, and Liechtenstein), are treated similarly to Singapore Citizens for their first property purchase.
3. Certain Transfers Within Families: Transfers of property between certain family members (such as spouses, or from parents to children) might qualify for ABSD exemptions under specific conditions.

ABSD Rebates

1. Married Couples with Mixed Residency Status: If a Singapore Citizen is married to a PR or a foreigner, the couple may be eligible for an ABSD rebate, subject to them not owning any other residential property at the time of purchase.
2. Replacing a Sold Property: Buyers who sell an existing property within a stipulated period after purchasing a new one may qualify for an ABSD refund. This is particularly relevant for Singapore Citizens buying their second property and PRs buying their first.

ABSD Remission for Housing Developers

Housing developers may apply for remission of the ABSD rate under certain conditions, although the additional 5% they pay is non-remittable.

Important Considerations

• Timelines and Conditions: Buyers should be aware of the timelines and specific conditions attached to these exemptions and rebates. Non-compliance with the criteria can lead to the forfeiture of the exemption or rebate.
• Legal Advice: Given the complexity and potential financial implications, seeking legal advice or consulting with property experts is advisable to navigate the ABSD landscape effectively.

ABSD for Different Buyer Profiles: Citizens, PRs, and Foreigners

Here is an overview of how ABSD impacts Singapore Citizens, Permanent Residents (PRs), and Foreigners:

Singapore Citizens

• First Property: Exempt from ABSD, facilitating homeownership.
• Second Property: 20% ABSD, discouraging property hoarding and speculative investment.
• Third and Subsequent Properties: 30% ABSD, further deterring the accumulation of multiple properties.

Singapore Permanent Residents (PRs)

• First Property: 5% ABSD, reflecting a commitment to Singapore while ensuring accessibility to the property market.
• Second Property: 30% ABSD, aligned with the discouragement of property hoarding.
• Third and Subsequent Properties: 35% ABSD, imposing a higher barrier to multiple property ownership.

Foreigners

• Any Residential Property: 60% ABSD, one of the highest rates, aimed at significantly moderating foreign investment in Singapore’s residential property market.

Rationale Behind Different Rates

The tiered ABSD rates are designed to prioritize housing affordability for Singapore Citizens, especially first-time buyers. For PRs, the ABSD structure acknowledges their contribution to the economy while maintaining a balanced approach towards property ownership. The high ABSD rate for foreigners addresses concerns about excessive foreign investment inflating property prices and ensures that the primary focus of the residential property market remains on meeting the needs of locals.

Impact on Property Purchasing Decisions

These varying rates significantly influence property purchasing decisions:

• For Singapore Citizens: Encourages prudent investment and focus on homeownership.
• For PRs and Foreigners: Acts as a deterrent against speculative investment, encouraging commitment to long-term residence in Singapore.

Reducing The Impact Of ABSD: Legal Methods and Considerations

While the Additional Buyer’s Stamp Duty (ABSD) in Singapore represents a significant financial consideration for property buyers, there are legal methods and considerations that can help mitigate its impact.

Selling Existing Property First

One of the most straightforward strategies to avoid or reduce the ABSD is to sell an existing property before purchasing a new one. This is particularly applicable for those upgrading from one property to another. Timing the sale and purchase correctly can exempt the buyer from the ABSD for a second property or qualify them for a rebate.

Decoupling Ownership

Decoupling is a strategy where joint owners of a property restructure the ownership to enable one of them to buy another property without incurring ABSD. This often involves one owner selling their share to the other. While legal, this strategy requires careful consideration of various factors, including financial implications and eligibility for loans.

Buying Under a Single Name

For married couples, purchasing a property under a single name can be an effective way to circumvent the ABSD for a second property. This approach is particularly useful if one spouse does not own any property.

Utilizing ABSD Remissions and Rebates

Certain buyer categories, such as married couples comprising a Singapore Citizen and a PR or foreigner, may qualify for ABSD remission under specific conditions. Additionally, there are provisions for ABSD rebates in scenarios like replacing a sold property within a stipulated period.

Investing in Commercial or Industrial Properties

Investors looking to avoid the ABSD on residential properties might consider commercial or industrial properties instead, as these are not subject to ABSD.

Legal and Financial Advice

Given the complexity and potential risks involved in these strategies, seeking legal and financial advice is highly recommended. This ensures that buyers make informed decisions and remain compliant with the regulatory framework.

The Evolution of ABSD Since 2011

The Additional Buyer’s Stamp Duty (ABSD) has undergone several revisions since its introduction in 2011, reflecting the Singapore government’s responsive approach to the changing dynamics of the property market. A historical perspective provides insight into the rationale behind these changes and their impact.

Initial Implementation in 2011

• Objective: Introduced as a cooling measure to curb speculative buying and soaring property prices.
• Initial Rates: Relatively modest compared to subsequent revisions, targeting mainly foreign buyers and entities.

Progressive Increases and Specific Rates

• January 2013: ABSD rates were increased, broadening the impact to include a wider range of buyer profiles. For instance, the rate for foreigners buying any property rose from 10% to 15%.
• July 2018: Another round of increases saw the ABSD for foreigners climb to 20%, while Singapore Citizens buying their third and subsequent properties faced a rate of 15%.
• December 2021: A significant hike in rates occurred; for example, foreigners faced a 30% ABSD, while Singapore Citizens buying a second property were subject to 17%.
• April 2023: The latest revision marked one of the most substantial increases; foreigners buying any residential property now face a 60% ABSD, and Singapore Citizens buying a second and third property face rates of 20% and 30% respectively.

ABSD Compliance

Property buyers in Singapore should comply with the Additional Buyer’s Stamp Duty (ABSD) regulations. Here are the procedures for payment and the consequences of non-compliance to ensure a smooth property transaction process.

Procedures for Paying ABSD

1. Calculation of ABSD: The ABSD amount is calculated based on the higher of the purchase price or the market value of the property.
2. Timing of Payment: ABSD must be paid within 14 days after signing the Sale and Purchase Agreement (SPA) if the agreement is signed in Singapore. If the SPA is signed overseas, the deadline extends to 30 days after receiving the agreement in Singapore.
3. Payment Method: Payment can be made online through the e-Stamping Portal of the Inland Revenue Authority of Singapore (IRAS). Buyers can use NETS, cheque, or cashier’s order for the payment.
4. CPF Usage: Buyers can use their Central Provident Fund (CPF) to pay ABSD. However, the payment must initially be made in cash, after which buyers can apply for reimbursement from their CPF accounts.
5. Stamp Certificate: Upon successful payment, a stamp certificate is issued, which is required for the legal completion of the property purchase.

Penalties for Late or Non-Payment

• Late Payment Penalties: If ABSD is not paid by the due date, a penalty is imposed. This can range from a nominal fee to a substantial fine, depending on the delay duration.
• Legal Action: In severe cases of non-compliance, legal action may be taken. The IRAS has the authority to enforce the payment of unpaid stamp duties, including ABSD.
• Interest Charges: Interest may be charged on the outstanding ABSD amount for the period of delay.

Conclusion

For personalized advice and assistance in complying with these regulations, speak to us to ensure that your property investments align with the latest legal requirements and market trends.