IRAS offers clarifications on ABSD
Some clarifications leave those affected without definite answers
By MICHELLE TAN
SEVERAL clarifications were made by the Inland Revenue Authority of Singapore (IRAS) in its revised e-Tax Guide on the government's latest property cooling measure - the additional buyer's stamp duty (ABSD).
One of the clarifications that piqued the interest of many involved the quantum of stamp duty payable by a foreigner if a price discount in the form of cash rebates and vouchers was offered by the developer selling the property
- an increasingly prevalent practice by developers seeking to lure back customers who have shied away from the latest cooling measure.
IRAS's reply was that if the discount was not given to all buyers and the final price paid was below the market value paid by the buying majority, the foreign buyer would have to declare the pre-discount price and pay a stamp duty based on that amount.
Another key point highlighted by IRAS is that the ABSD only applies to sites that are zoned residential in the Master Plan.
To rezone the land for residential use, the ABSD would be levied on the development charge paid for rezoning purposes and remissions would not apply to the development charge.
Lee Liat Yeang, Partner at Rodyk & Davidson LLP, said: 'This clarification makes clear that IRAS looks at the current zoning of the property to determine whether ABSD applies. It also widens the ABSD to capture 'develop-ment charge' which is often payable in a change of use.'
With regard to the purchase of development sites with four or less than four home units, the remission of the ABSD may also be permitted on a case-by-case basis and on the condition that the developer goes through with its intention to develop the residential properties for sale and is a company 'lawfully carrying on the business of housing development'.
In the past, the remission of the ABSD was allowed only for developers who are eligible for licensed housing developments which consist of five or more residential units.
Developers may also purchase more plots of land for amalgamation purposes after their first purchase of land for development.
In the event the first transaction was not subject to the ABSD, remission on the subsequent purchase may also be considered on a 'case-by-case' basis - such as if the acquisition of the subsequent plot is contingent upon planning approval or if the plot acquired is incapable of independent development.
However, some clarifications were a little vague, leaving those affected without definite answers.
One such example revolved around a potential clawback of the ABSD for parties that sold their properties just before purchasing a new one, but face an aborted transaction for the older property. A reply states that the potentiality of a clawback would depend on 'circumstances of the case'. Buyers in such a situation are left as clueless as they were before.
Commenting on IRAS's response, Mr Lee said: 'It is unclear from the clarification whether IRAS will claw back the ABSD exempted. But in my view, it appears that IRAS will not do so unless it finds the 'reason' to do so; that is, there was a 'scheme to avoid ABSD'.'
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