Buyer’s Stamp Duty (BSD) & Additional Buyer’s Stamp Duty (ABSD) in Singapore

  • 5 months ago
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Buyer’s Stamp Duty & Additional Buyer’s Stamp Duty Guide for Singapore Property Buyers

I. Introduction

Welcome to our in-depth guide on understanding the fundamentals of Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD) in Singapore. As a potential property buyer or investor, it’s crucial to have comprehensive knowledge of the intricacies of these taxes, as they significantly impact your purchasing decision and your financial planning.

First, let’s familiarize ourselves with the term ‘Stamp Duty.’ It is a tax that government bodies levy on legal documents, often related to the transfer of assets or property. In the context of real estate, this is a fee you’re required to pay when you purchase a property. In Singapore, this tax takes two forms – the BSD & ABSD. 

Together, these two taxes form a substantial portion of the cost of acquiring property in Singapore and directly influence the overall investment decisions and strategies. Therefore, understanding how these duties work, their rates, and how they are applied is vital for all buyers.

This guide will provide you with a comprehensive understanding of BSD and ABSD, from their basic concepts, how they are calculated, to whom they apply, and when they should be paid. Additionally, we will discuss any exemptions and remissions available, how these stamp duties impact Singapore’s property market, and strategies you can employ to minimize your tax liability.

Stay with us as we unravel the complexities of these taxes to aid your journey as a property buyer or investor in Singapore. Remember, knowledge is power, especially when navigating the vibrant and dynamic property market of Singapore.

Stay tuned as we demystify these essential aspects of property investment in Singapore!

Table of Contents

II. Basics of Buyer’s Stamp Duty (BSD)

Understanding the concept and intricacies of Buyers Stamp Duty (BSD) is essential for anyone planning to dive into the Singapore property market. So, what exactly is BSD, and how does it affect you as a property buyer?

A. What is Buyer’s Stamp Duty?

Buyers Stamp Duty (BSD) applies to everyone who purchases a property in Singapore, regardless of their nationality or the number of properties they already own. BSD is a tax imposed on all property purchases in Singapore. 

Introduced by the Inland Revenue Authority of Singapore (IRAS), the BSD is levied on the documented price of the property or its market value, whichever is higher. This ensures that the tax applies fairly based on the real value of the property.

It is a fundamental cost that accompanies the acquisition of property and is payable upon acceptance of the Option to Purchase (OTP) or Sale & Purchase Agreement (S&PA), whichever is applicable.

Buyers Stamp Duty

B. How is BSD calculated?

The calculation of BSD is progressive, similar to income tax. It is structured in a way that it increases with the value of the property:

BSD for residential properties:

  • 1% on the first S$180,000
  • 2% on the next S$180,000
  • 3% on the next S$640,000
  • 4% on the next S$500,000
  • 5% on the next S$1,500,000
  • 6% for the remaining amount.
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To illustrate this, let’s consider a residential property was purchased after 17 Feb 2023 at $4,500,100 which is reflective of the market value. The BSD payable would be $209,606 calculated as follows: (1% of $180,000) + (2% of $180,000) + (3% of $640,000) + (4% of $500,000) + (5% of $1,500,000 + (6% of $1500,100).

The BSD rates for non-residential properties are as follows:

  • 1% on the first S$180,000
  • 2% on the next S$180,000
  • 3% on the next S$640,000
  • 4% on the next S$500,000
  • 5% for the remaining amount

C. Who is liable to pay?

The buyer of the property is liable to pay the BSD. Whether you’re a first-time buyer or a seasoned investor, BSD applies to every property transaction in Singapore.

D. When is the BSD payment due?

BSD must be paid within 14 days after accepting the Option to Purchase (OTP) if the property is bought directly from the seller. If the property is bought through a developer, the BSD should be paid within 30 days of signing the Sales & Purchase Agreement.

Understanding the specifics of BSD is essential to budget accurately for your property investment. The next section of our guide will cover the Additional Buyers Stamp Duty (ABSD), a layer of tax applied on top of BSD under certain circumstances.

III. Basics of Additional Buyers Stamp Duty (ABSD)

If you’re a property buyer in Singapore, especially one with multiple properties or a foreigner, understanding the Additional Buyers Stamp Duty (ABSD) is critical. This additional layer of tax on property purchase is designed to regulate the residential property market and moderate investment demand.

A. What is Additional Buyers Stamp Duty?

The Additional Buyers Stamp Duty (ABSD) was introduced in December 2011 to cool the residential property market by imposing extra costs on certain categories of buyers. Unlike the BSD, which applies uniformly to all property buyers, the ABSD rates for residential properties varies based on: 

  • Your citizenship or residency status
  • The number of residential properties you own
  • Whether you’re an individual, an entity or developer

B. How is ABSD calculated?

The ABSD is calculated as a percentage of the property’s purchase price or market value, whichever is higher. The percentage rate varies depending on the buyer’s profile:

1. Singapore Citizens: For the first residential property purchase, Singapore citizens are not required to pay ABSD. However, for the second property, a 20% ABSD applies, and this rate increases to 30% for the third and subsequent properties.

2. Singapore Permanent Residents: Singapore PRs are required to pay an ABSD of 5% for their first property purchase, and this increases to 30% for the second, and this rate increases to 35% for the third and subsequent properties.

3. Foreigners: Foreign individuals are subject to a flat ABSD rate of 60% regardless of the number of properties purchased.

4. Entities: Entities (such as companies or trusts) are subject to a flat ABSD rate of 65% regardless of the number of properties purchased.

C. Who is liable to pay ABSD?

Just like BSD, the buyer of the property is liable to pay the ABSD. The rate depends on their residency status and the number of properties they currently own.

D. When is the ABSD payment due?

The ABSD must be paid within the same timelines as the BSD – within 14 days of accepting the Option to Purchase (if buying directly from the seller), or within 30 days of signing the Sales & Purchase Agreement (if buying from a developer).

Singapore Permanent Resident

E. Real-life examples to demonstrate how ABSD works

Let’s consider a real-world scenario: A Singapore Permanent Resident (PR) buying their third residential property worth $3,000,000. The ABSD payable would be $1,050,000 (35% of $3,000,000).

ABSD has a significant impact on property investment decisions, especially for those buying multiple properties or foreigners buying property in Singapore. It is designed to ensure the sustainability of the property market and prevent overheating.

In the next section of our guide, we will cover exemptions and remissions applicable to BSD and ABSD. Knowing this can help identify possible ways to lower your tax burden.

IV. Frequently Asked Questions (FAQs)

To wrap up our in-depth exploration of Buyers Stamp Duty and Additional Buyers Stamp Duty in Singapore, we’ll address some commonly asked questions. These responses aim to provide you with clear, concise, and useful insights into these crucial aspects of Singapore’s property market.

Missing the BSD or ABSD payment deadline can lead to penalties. If the payment is not made within the stipulated time, a late payment penalty is imposed. The penalty includes a flat 5% on unpaid duties, and an additional 1% per month if the duties remain unpaid beyond one month.

Typically, once the BSD or ABSD is paid, it cannot be refunded. However, if the sales agreement is rescinded or annulled due to specific conditions, you can apply to IRAS for a refund. This is subject to IRAS’s approval.

While it is true that PRs pay a lower ABSD rate than foreigners for their first property, it’s crucial to consider the timing and certainty of your PR approval. Also, given the dynamic nature of the property market, waiting might lead to changes in property prices or miss out on good investment opportunities.

You can use the Stamp Duty Calculator available on the IRAS website to verify the amount of BSD or ABSD payable. This calculator is designed to provide an accurate estimate based on the latest stamp duty rates.

Inheritance of a property does not attract BSD or ABSD. These duties are transaction-based taxes and apply only when there’s a purchase or transfer of property ownership for a consideration.

Yes, the Buyer’s Stamp Duty (BSD) applies to all property transactions in Singapore, including Housing Development Board (HDB) flats. The rate is progressive and ranges from 1% to 4%, depending on the purchase price or market value of the HDB flat, whichever is higher.

Yes, you can use your Central Provident Fund (CPF) to pay for the BSD and ABSD. However, this is subject to the available balance in your CPF Ordinary Account (OA). You must also satisfy all CPF regulations and ensure that after the CPF deduction, you have enough funds left for the minimum down payment and other transaction costs.

While ABSD is mandatory for all eligible property transactions, there are a few ways you can minimize its impact. These strategies include purchasing under a single name, applying for remissions if eligible, and considering decoupling or part-purchase. In addition, investing in commercial properties, which are not subject to ABSD, can be a viable strategy. However, each of these strategies comes with its own set of considerations and potential implications, so professional advice is recommended.

This FAQ section covers some of the most common questions about BSD and ABSD. However, the world of property tax can be complex, and individual situations may vary. It’s always recommended to seek professional advice for your specific circumstances.

VIII. Conclusion

Navigating the real estate landscape in Singapore can be an intricate task due to the presence of various stamp duties like the Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD). However, understanding these charges is paramount in making wise property buying decisions.

Through this comprehensive guide, we aimed to demystify the concept of BSD and ABSD, explaining how they are calculated, who is liable to pay them, and the due timelines. We also discussed the role these duties play in the larger context of Singapore’s property market, their impact on home ownership decisions, property prices, and foreign investment.

In addition, the guide explored strategies that potential buyers can employ to minimize their stamp duty costs. Remember, while these strategies can be beneficial, they come with their own sets of financial and legal implications, and it is always advisable to seek professional guidance.

Lastly, our FAQ section provided quick and concise answers to common questions surrounding these taxes. As individual situations can vary significantly, it’s crucial to consult a professional for personalized advice.

Remember, informed decisions are the best decisions. We hope this guide has empowered you with essential insights into Singapore’s property tax landscape and will aid you in your property buying journey. Whether you’re a first-time buyer, an investor, or someone looking to buy a second home, understanding BSD and ABSD is key to making strategic, financially sound decisions.

Stay tuned to our website for more insightful guides on Singapore’s property market.

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