In the "99-to-1" stamp duty tax avoidance case under investigation by Iras, a mother

In the "99-to-1" stamp duty tax avoidance case under investigation by Iras, a mother and son are charged

This is the first instance of a taxpayer being prosecuted for providing the tax collector with inaccurate and misleading information.

Sept. 20, 2024

When the Inland Revenue Authority of Singapore (Iras) audited cases of the alleged "99-to-1" arrangement for private properties, a mother-son team is accused of providing false and misleading information.

In a statement released Friday, September 20, the agency said that this is the first prosecution of taxpayers who gave Iras false and misleading information while it was looking into the two-step "99-to-1" property transactions for potential tax evasion.

Keith Tan Kai Wen, 26, and his mother, 56-year-old Ng Chiew Yen, are each facing five charges. Both of them belong to Singapore.

According to investigations, on September 24, 2021, Tan purchased a condominium unit in his sole name at the 99-year leasehold The Watergardens at Canberra in Sembawang, according to Iras. Later, he sold his mother a one percent stake in the property.

The fourth-floor unit, which was 753 square feet in size, was sold on August 28, 2021, for S$1.1 million, or S$1,477 per square foot, according to data from URA Realis.

In 2023, Iras began an audit of the transactions. The audit questioned Tan about why he didn't buy the property with Ng right away. He allegedly lied when he claimed that he had hurried to purchase the property, assuming his family would provide for him. But he claimed that because his family couldn't afford it, Ng had to be added as an owner in order to be eligible for a loan.

Tan was also charged with giving Iras false information through incomplete WhatsApp messages and other "false and misleading" answers to the agency throughout the audit.

Tan and Ng were each given five charges for allegedly plotting to give Iras false information and answers. They each face a maximum fine of S$10,000, a maximum jail sentence of two years, or both if found guilty.

In addition to collecting the correct amount of stamp duty from the buyers, Iras has the authority to impose a 50 percent surcharge on the additional duty that is due if it finds that tax avoidance has occurred. Stamp duty audits are not subject to any statutory time limits.

Assuming a purchase price of S$1.1 million, a Singaporean would be required to pay approximately S$220,000 in Additional Buyer's Stamp Duty (ABSD) for a second property, and approximately S$330,000 for a third or subsequent property. If it is the buyer's first property, there is no ABSD.

Evasion of taxes

This is among the 166 instances of private home purchases that Iras had discovered as of April 2024 that involved the use of the "99-to-1" or comparable arrangements to avoid ABSD. In these cases, approximately S$60 million in ABSD and surcharges will be recovered.

Some buyers of real estate use the "99-to-1" arrangement, a tax-avoidance strategy, to lower the amount of ABSD that is legally due when they buy a residential property.

Usually, people who have never owned a home before purchase residential properties in their sole name and then quickly sell a small portion of the property to someone with a higher ABSD profile.

In this arrangement, ABSD would only be due on the 1% portion of the property, rather than the entire purchase price, as it would have been if the purchase had been made jointly from the start.

In order to identify non-compliance and tax avoidance, Iras stated that audits of taxpayers' real estate transactions are carried out on a regular basis. As part of this audit, the "99-to-1" arrangement is being investigated to find transactions made with the intention of lowering or evading stamp duty.

"Each case's facts and circumstances determine whether a case is considered tax avoidance," the statement continued.

It further stated that those involved in a "99-to-1" property-purchase arrangement ought to voluntarily disclose it. "Iras is willing to take these cases more favourably, depending on the situation."

Whistleblowers who expose those involved in such arrangements to avoid or lower their ABSD are eligible for a reward equal to 15% of the tax recovered, up to a maximum of S$100,000. Iras stated that this is assuming the information and/or documents supplied result in the recovery of the tax that would have been lost otherwise.