Stamp duty loophole: What closing it might mean for property buyers

5 min read
Closing the stamp duty loophole would bring severe ramifications to developers and foreign buyers alike
Closing the stamp duty loophole would bring severe ramifications to developers and foreign buyers alike

Minister of National Development Lawrence Wong panicked some property buyers and developers earlier this month with an important announcement. The Minister mentioned that: “In principle, we should treat transactions in residential property on the same basis, regardless of whether a property is transferred directly or through a transfer of shares in a company whose primary business is in residential property in Singapore.” The Minister is referring to a stamp duty loophole, which currently allows property buyers to bypass stamp duties.

Here’s what it all means.

What is the stamp duty loophole that is being addressed?

There is currently a stamp duty loophole, that allows property buyers to dodge the Buyers Stamp Duty (BSD) and Additional Buyers Stamp Duty (ABSD). This involves the sale of the property to a corporate entity (often just a shell company), and then buying over the shares in the company.

Picture this:

Say you want to buy a property, which costs $2 million. (This stamp duty loophole is actually used for the purchase of multiple properties, up to several hundred million dollars, but we are using a simplified example here).

As you are a foreigner, you would pay 18 percent in stamp duties (3 percent BSD, and 15 percent ABSD). That comes to around $360,000.

Instead of paying this steep sum however, you and the developer devise a workaround. The property is sold for $2 million to a shell company, which is cheap and easy to set up. You then buy up the shares in this company, which also gives you ownership of the property as you now own the company.

Now the tax involved is just 2 percent of the company’s Net Asset Value. Let’s say, for simple purposes, the company’s sole asset is the $2 million house that also defines its Net Asset Value. Your tax is 0.2 percent of this, or $4,000. You save $356,000 by buying the property through the company.

It’s not exactly this simple, but this should give you a general idea of how it works: you are buying shares in a company that owns the property, rather than the property itself. Therefore, there is no BSD or ABSD, as you are not officially buying any property.

One example of this occurred at The Nassim in January this year. Banker Wee Cho Yao purchased 45 units in this development, for $411.6 million. However, the property was not sold directly to him, but to a company (Nassim Hill Realty). He then purchased a 100 percent stake in Nassim Hill Realty, effectively gaining ownership of The Nassim without paying stamp duties.

What does the government intend to do about this?

We don’t know the specific details. All we know is that legislative measures will be taken, to amend the rules somehow. One of the things Minister Wong mentioned was that:

“…significant owners of residential-property-holding entities will be subject to the usual stamp duties when they transfer equity interest in such entities, like what would happen if they were to buy or sell the properties directly”.

This suggests that, if someone purchases a big stake in a company that owns property, they might be taxed as if they had bought the property directly.

What impact could this have?

Potential rule changes will be a worry to developers, some of whom have bought properties via shell companies.

There have been many developers who set up companies to bulk buy their own properties, to avoid Qualifying Charges (QC). The QC imposes additional taxes, based on the price of the land, for developers that cannot complete and sell their properties within a given time limit.

By purchasing the properties in bulk via a shell company, developers could mark the properties as being officially “sold.” This spared them the prospect of paying QC charges, and gave them the opportunity to sell in a way that wouldn’t saddle their buyers with stamp duties.

The opportunity to do this could soon be gone, depending on how the rule changes take place. The loss of the stamp duty loophole would mean an added burden on some developers, who are already struggling in the slow market.

Another source of worry is for companies and investors that don’t intend to exploit this stamp duty loophole, but could be affected anyway. For example, a company may invest in residential properties as part of a wider portfolio of assets, to earn returns for its various investors. It remains to be seen if investors with a big stake will end up being asked to pay stamp duties, even if it is not their intention to own property via a fund.

This will have to be a complex piece of legislation, with many exceptions and potentially difficult definitions.

As can be expected, developers of high-end properties are not happy. This stamp duty loophole is often used for luxury developments, where the majority of buyers are foreigners facing ABSD charges. This is likely to dissuade buyers, and slow sales even more.

New launch alert! Welcome to Grand Dunman

Grand Dunman Registration


Select an Option
Country Code and Mobile Number

About Ryan Ong

Looking to sell your property?

Whether your HDB apartment is reaching the end of its Minimum Occupation Period (MOP) or your condo has crossed its Seller Stamp Duty (SSD) window, it is always good to know how much you can potentially gain if you were to list and sell your property. Not only that, you’ll also need to know whether your gains would allow you to right-size to the dream home in the neighbourhood you and your family have been eyeing.

One easy way is to send us a request for a credible and trusted property consultant to reach out to you.

Alternatively, you can jump onto’s Property Value Tool to get an estimate for free.

If you’re looking for your dream home, be it as a first-time or seasoned homebuyer or seller – say, to upgrade or right-size – you will find it on Singapore’s fastest-growing property portal

Meanwhile, if you have an interesting property-related story to share with us, drop us a message here — and we’ll review it and get back to you.

Join our social media communities!

Facebook | Instagram | TikTok | TelegramYouTube | Twitter

Reader Interactions

Leave a comment

Your email address will not be published. Required fields are marked *

Get the latest news in your inbox

  • This field is for validation purposes and should be left unchanged.