Property firms scramble to close deals before new stamp duty takes effect

In a filing to the Singapore Exchange last Friday, Sing Holdings said it had sold its 100 per cent stake in Sing Holdings (Robin). The buyer, a Singapore entity not related to the firm, paid $72.7 million for 29 units at the Robin Residences condomin
In a filing to the Singapore Exchange last Friday, Sing Holdings said it had sold its 100 per cent stake in Sing Holdings (Robin). The buyer, a Singapore entity not related to the firm, paid $72.7 million for 29 units at the Robin Residences condominium.ST PHOTO: CHEW SENG KIM

Property firms scrambled to close some large residential deals last Friday, after a sudden government announcement on the stamp duty rate, effective last Saturday.

The move was aimed at bringing the rate applying to the transfer of shares in property-owning companies in line with the rate applied to regular property deals.

At least three such deals were completed at the eleventh hour last Friday, The Straits Times understands.

First, a consortium led by Mr Ben Yeo, former managing director of engineering and property group Guthrie GTS, reportedly purchased 28 units at TwentyOne Anguilla Park for around $160 million.

Second, in a filing to the Singapore Exchange last Friday, Sing Holdings said it had sold its 100 per cent stake in Sing Holdings (Robin). The buyer, a Singapore entity not related to the firm, paid $72.7 million for 29 units at Robin Residences condominium.

 

Third, more than 80 units changed hands through a transfer of shares at The Line@Tanjong Rhu for an undisclosed price.

Developers and buyers scrambled to avoid the newly introduced additional conveyance duty (ACD). For buyers, on top of the 0.2 per cent share duty tax, they must pay ACD comprising 1 per cent to 3 per cent on the value of underlying residential properties and a flat 15 per cent on the value of those assets.

Sellers, who are significant owners, disposing of their equity stake within three years of acquisition will have to pay a flat 12 per cent levy.

The Government was moving to align the rates imposed on direct purchase of residential properties and the transfer of shares in property- owning companies.

A direct purchase of residential property attracts buyer's stamp duty of 3 per cent and, depending on the buyer's citizenship, up to 15 per cent additional buyer's stamp duty. In contrast, acquiring shares of a holding company that owns the property incurred a share duty tax of just 0.2 per cent of the firm's net asset value, prior to the introduction to the ACD.

A Finance Ministry spokesman said: "As the ACD came into effect on March 11, 2017, it applies only to transactions on and after March 11. We do not comment on the tax obligations of individual taxpayers for confidentiality reasons."

Mr Ian Loh, executive director and head of investment and capital markets at Knight Frank, brokered the Sing Holdings deal, and said the parties began viewings last year and were discussing pricing over the past two months.

"The sudden announcement helped to speed things up. Unless you have been in discussions, it is virtually impossible to seal a deal in less than a day," he said.

Several lawyers told The Straits Times they fielded more calls from interested parties than they could handle and were hammering out agreements in five to six hours, in a process that usually takes weeks.

Mr Norman Ho, corporate real estate partner at Rajah & Tann, said such agreements take weeks as liability and indemnity issues are involved in the purchase and sale of an entity, and cannot be "one-page documents, which would be seen as an arrangement to avoid tax".

Mr Kenneth Szeto, a partner at Colin Ng & Partners, said "it is unlikely that developers will still find it worthwhile to engage in the transfer of shares, as the total transaction cost is likely to exceed the potential qualifying certificate penalties".

SEE BUSINESS: CapitaLand calls for more time to sell units

A version of this article appeared in the print edition of The Straits Times on March 14, 2017, with the headline 'Property firms close deals before new stamp duty takes effect'. Print Edition | Subscribe