What you need to know about the new ABSD (Trust): 35% rate + conditions for remission

35% Additional Buyer’s Stamp Duty (ABSD) will now apply for any transfer of residential property into a living trust from 9 May onwards, as announced by the Ministry of Finance late on 8 May.

Previously, the Buyer’s Stamp Duty (BSD) was payable for the transfer. Depending on the profile of the beneficiary, ABSD might also be payable. On the other hand, if there was no identifiable beneficial owner at the time of transfer into a trust, payment of the ABSD was not required.

With this change, under ABSD (Trust), a trustee will have to pay the ABSD even when there is no identifiable beneficial owner at the time of the transfer of the residential property.

According to the press release, “ABSD aims to promote a stable and sustainable residential property market, and as such, it should apply to transfers of residential properties into all living trusts, irrespective of whether there are identifiable beneficial owners of the residential properties transferred into such trusts.”

Lam Chern Woon, Head of Research and Consulting at Edmund Tie, remarked that this change serves to level the playing field among market players.

“While it is the intention of parents to leave an advance legacy for their children, some have bemoaned that this runs the risk of exacerbating the state of inequality. There is no policy that can please all stakeholders, but going by how the government has been tweaking the rules to create a more inclusive and fair society, including the latest Budget 2022 revisions to property tax and vehicle tax, the writing was on the wall on the creation of such trusts.”

At the same time, Lam believed its impact on the market is not likely to be significant, given that the majority of property purchases are not made through trusts.

Remission of ABSD (Trust)

The trustee may also apply to IRAS for a refund of the ABSD (Trust) if all of the following conditions are met:

• All beneficial owners of the residential property must be identifiable individuals (i.e. you cannot transfer it to an unborn child)
• The beneficiary owner must own the property now and not in future; and
• The trust deed cannot be changed or revoked, or come with any conditions eg. the child will only own the house when they get married, so it must be a genuine gift to the beneficiary

According to IRAS, the remission intends to “equalise the ABSD treatment for transfers of residential properties, irrespective of whether a trust is involved or not”.

The refund amount will be based on the difference between the ABSD (Trust) rate of 35% and the ABSD rate for the profile of the beneficial owner, with the highest rate to be applied.

For instance, a trustee has bought a residential property on trust for his Singaporean wife, who has one property under her name. This means that the refund will be 18% (35% – 17%) as this will be the second property under her name.

On the other hand, the remission will not be applicable if the property is held in trust for a child whose interest will only be vested when they turn 21. This is because this would mean that the beneficiary would only own the property in future.

To be eligible for the remission, the trustee can apply via the IRAS e-Stamping portal within six months from the date of the execution of the instrument.

The following supporting documents will also be needed:

• Copy of the trust instrument
• Copy of the Option to Purchase or Sale and Purchase Agreement (if applicable)

What do you think of the ABSD (Trust)? Let us know in the comments section below or on our Facebook post.

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