Stake transfers in property holding entities to nameless living trusts may face up to 44% additional duty

The latest measure applies to both new and existing living trusts. PHOTO: ST FILE

SINGAPORE - Transfers of stakes in a property holding entity into living trusts with non-identifiable owners will be subject to an additional conveyance duties (ACD) of up to 44 per cent if a new Bill is passed.

The ACD (Trust) duties will be payable on transfers of equity interests in such entities from Tuesday (May 10) into living trusts where the significant ownership threshold has been reached, even if there is no identifiable beneficial owner of such interests at the time of transfer, said the Ministry of Finance (MOF) on Monday.

Property holding entities (PHEs) include asset holding companies and family offices' fund vehicles. They have at least 50 per cent of their total tangible assets in residential properties in Singapore.

A significant owner - one who holds at least 50 per cent equity interest in a PHE - is subject to the additional conveyance duties if the PHE shares are bought or sold.

The latest measure applies to both new and existing living trusts, where a designated person, the trustee, is given responsibility of managing an individual's assets for the benefit of the eventual beneficiary.

The ACD aims to address the stamp duty rate differential between direct acquisitions and disposals of residential properties, and indirect ones through a transfer of the equity interest in a property holding entity.

It currently applies to transfers of such interests into living trusts with identifiable beneficial owners who are or become significant owners of the entities. It may not apply when there is no identifiable owner at the time of transfer.

MOF said that it will consider the equity interests the trustee holds for the trust, together with those held by his associates, in determining whether the threshold for significant ownership is reached.

ACD (Trust) rates will be the same as existing ACD rates for buyers and sellers. Buyers are currently subject to an existing stamp duty of 1 per cent to 4 per cent and an additional stamp duty of 40 per cent. Meanwhile, sellers pay a flat duty of 12 per cent.

Dentons Rodyk partner Quek Ling Yi said the new proposed rule will affect people who have been trying to use a nameless trust to avoid high taxes. These include high-net-worth individuals who own multiple properties, she told The Straits Times.

The measure comes after the authorities announced on Sunday that transfers of residential properties into a living trust will be subject to an additional buyer's stamp duty (ABSD) of 35 per cent from Monday.

MOF said on Monday that both measures will together plug a gap in the existing ABSD and ACD regime.

The ACD (Trust) rule is part of a new Bill introduced in Parliament on Monday which also includes a stamp duty on renouncing an interest in a residential property held on trust.

The Government will impose a buyer's stamp duty and, where applicable, ABSD and a seller's stamp duty, when interest in a residential property held on trust is renounced by a beneficial owner.

These duties will apply when a residential property is transferred into a living trust from Tuesday, all the beneficial owners of the residential property are identified at the time of transfer, and a beneficial owner of that property renounces his interest in it from Tuesday.

The beneficial owner who renounces his interest must notify the settlor (the person who created the living trust) and the Commissioner of Stamp Duties of the renunciation in writing within a specified period. Offenders can be fined up to $1,000 if they fail to do so.

The original beneficial owner may also be liable for seller's stamp duty upon his renunciation. Meanwhile, the settlor will have to pay the applicable stamp duty within a specified period.

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