SINGAPORE - Buyers who bought private properties using the “99-to-1” purchase arrangement can come forward voluntarily to make good any underpayment of taxes, and the taxman will, in general, look at such cases more favourably.
Senior Minister of State for Finance Chee Hong Tat said this in Parliament on Friday, amid recent scrutiny of some buyers who used the loophole to avoid paying additional buyer’s stamp duty (ABSD).
About 0.5 per cent of private residential properties transacted in the period from 2018 to 2021 involved “99-to-1”, or similar, purchase arrangements, where the owners sold a partial interest in the property to another buyer within a short period of time, said Mr Chee, in response to five MPs who filed questions on the issue.
Such a deal allows the buyer, who already owns other properties, to avoid the ABSD, while still becoming the new property’s co-owner and a co-applicant for bank loans to finance it.
The Inland Revenue Authority of Singapore (Iras) is looking into private property purchases with such arrangements.
Earlier in April, The Straits Times reported that Iras had sent letters to some first-time buyers, asking them to explain why they sold just 1 per cent of the same property to a relative within a short period of time after exercising the purchase option.
Mr Chee said that taxpayers who wish to come forward voluntarily to disclose and make good any underpayment of taxes may do so.
“Iras would look into each case on a case-by-case basis, depending on the circumstances. But, in general, I would say that if you come forward in such cases to voluntarily disclose, Iras will look at the case more favourably,” he said.
Buyers who have existing properties must pay the full ABSD sum as long as they own any interest in a property, including when they buy properties with first-time owners.
Singaporeans who have second properties pay 17 per cent ABSD; those with more properties pay 25 per cent.
Anyone caught avoiding the ABSD for second and subsequent properties will have to pay the outstanding amount, and an extra 50 per cent surcharge may be imposed as the minimum penalty.
Mr Chee said Iras adopts a risk-based approach to detect and enforce against non-compliance and tax avoidance.
As part of its surveillance efforts, Iras has detected a small but rising number of “99-to-1” arrangements in recent years, he added.
“It has therefore initiated audits of such transactions to better understand the circumstances of each case and ensure that buyers fulfil their rightful stamp duty obligations. Whether or not the ‘99-to-1’ arrangement involves tax avoidance depends on the facts and circumstances surrounding the specific case.”
Mr Chee noted that there is no statutory time limit for stamp duty audits. This means the ongoing investigation could target all cases involving such deals since 2011, when the ABSD was introduced.
Other than the buyers, he said, the Government also takes a serious view of individuals who promote or facilitate such tax avoidance arrangements.
Those identified as doing so will be referred by Iras to the relevant regulatory agencies, said Mr Chee in response to Mr Don Wee (Chua Chu Kang GRC), who had asked if lawyers will be held accountable as they have a duty to highlight such risks when drafting the agreements.
In the case of property agents, they will be referred to the Council for Estate Agencies for investigation and disciplinary action, said Mr Chee. Depending on the severity of the breach, agents may face financial penalties and/or suspension of their registrations.
“The large majority of taxpayers are compliant and pay the taxes that are due. We thank them for their contributions to our fair and progressive system of taxes and transfers, where individuals with greater means will contribute more and those who are vulnerable and earn lower income will receive more help,” said Mr Chee.
