SINGAPORE - A Bill has been passed in Parliament that will see residential property transactions that involve the transfer of the equity interest rather than the direct purchase of property being subject to higher stamp duty. The law will take effect on Saturday (March 11).
The move by the Government is meant to align the stamp duty levied on residential property transactions through transferring the equity interest in the entity that owns the properties with the rate levied on direct property transactions.
The aim is not to affect the ordinary buying and selling of shares in listed companies by retail investors, said Second Minister for Finance Lawrence Wong.
Mr Wong had earlier indicated that changes were on the cards. He had told Parliament on Tuesday: "In principle, we should treat transactions in residential property on the same basis, regardless of whether a property is transferred directly or through a transfer of shares in a company whose primary business is in residential property in Singapore." He was responding to a suggestion from MP Yee Chia Hsing.
Currently, a direct purchase of residential property incurs buyer's stamp duty of 3 per cent. Depending on the buyer's citizenship, up to 15 per cent additional buyer's stamp duty (ABSD) is imposed.
But the buying of shares in a firm which owns the property incurs a share duty tax of only 0.2 per cent of the firm's net asset value.
Now significant owners of residential property-holding entities (PHEs) will be subject to equivalent stamp duties when they transfer the shares as when they buy or sell the properties directly.
The Government will introduce a new additional conveyance duty (ACD) for the buyer which comprises a flat 15 per cent levy on the value of the underlying residential properties, and a 1 to 3 per cent levy that is intended to mirror the buyer's stamp duty.
For the seller, an ACD of a flat 12 per cent on the value of the underlying residential properties will apply.
The ACD will be pro-rated based on the percentage of equity interest acquired or disposed of.
Developers have been trying to offload unsold units as they will have to incur ABSD or Qualifying Certificate (QC) charges if they cannot sell all their units by a certain time.
In a rare move, the Bill was introduced and passed in one sitting. Mr Wong told Parliament that this was due to the market sensitive nature of the Bill.
The Government's move comes after several high-profile property transactions via transfer of shares. However the move is not seen as plugging a loophole but more at aligning the stamp duty rate differentials between direct and indirect property transactions.
Veteran banker Wee Cho Yaw made headlines in January for buying 45 unsold units at upmarket condominium The Nassim from CapitaLand for S$411.6 million. The deal was made through the purchase of a 100 per cent stake in Nassim Hill Realty.
Last July, Wing Tai Holdings sold its share in its joint venture company Summervale Properties, which developed the Nouvel 18 condo, to City Developments for $410.96 million. In October, CDL then offloaded Nouvel 18 to a group of Singaporean investors via a S$977.6 million profit participation securities platform. This is similar to a bond structure where the investors get an annual payout. Of the S$977.6 million, S$102 million was raised through issuing equity shares.