Most likely, you and your spouse wish to purchase a second home in Singapore, but you are reluctant to pay the hefty Additional Buyer’s Stamp Duty (ABSD) that applies when owning two properties in the country. To find out more about Decoupling Property Singapore and if there are any workarounds, you conduct a Google search.
Property Decoupling was long regarded as the “holy grail” option in Singapore because it allowed couples to purchase “ABSD-free” investment properties. However, split 99-to-1 homeownership agreements would be investigated by the Inland Revenue Authority of Singapore (IRAS).
If it is determined that this arrangement is artificial or fictitious, the two may be held responsible for an unpaid stamp duty bill, as well as a 50% fee on the excess duty due. In any case, you don’t want to deal with that.
The ABSD must be paid by Singapore Citizens when they want to buy a second or subsequent residential home. A Singaporean would have to ensure that no other residential properties were registered in their name at the time of purchase to avoid this.
By dividing their original property and ceding their share to the other co-owner, co-owners can avoid this issue and others. As a result, one person becomes the sole owner of the existing property and is not subject to the ABSD’s regulations for the purchase of new dwellings.
But why would going to the hassle of Decoupling Property Singapore be necessary? Why don’t you buy the property immediately under one of the couple’s names? But there is a valid explanation for this, and it relates to financing.
Banks need to ensure that the Total Debt Servicing Ratio (TDSR) is not exceeded by the amount they lend to a buyer. According to TDSR, a borrower’s total monthly loan obligations at the beginning of each month cannot exceed 55% of their gross monthly income.
A couple purchasing a home can borrow more money than they could if they were purchasing it separately because the TDSR is determined using their combined gross monthly income. Stated differently, this 99-to-1 arrangement permits couples to obtain additional bank loans when they buy their first piece of real estate and subsequent ABSD-free investment properties.
Is Decoupling Property Singapore Illegal? It’s not tax fraud, though. Don’t forget that tax evasion is illegal. The legal ramifications of purposefully lowering or avoiding your tax liability or obtaining tax refunds through unlawful means are more severe than any “savings” you may be hoping to find.
