Most likely, you and your spouse want to purchase a second property in Singapore, but you don’t want to pay the high Additional Buyer’s Stamp Duty (ABSD) that applies to owning two properties. To find out more about Decoupling Property Singapore and if there are any workarounds, you conduct a Google search.
Property Decoupling was previously regarded as the “holy grail” in Singapore, as it allowed couples to purchase “ABSD-free” investment properties. However, split 99-to-1 homeownership agreements would be investigated by the Inland Revenue Authority of Singapore (IRAS).
If it is determined that this arrangement is artificial or fraudulent, the two may be held responsible for an unpaid stamp duty bill, as well as a 50% fee on the excess duty due. In any case, you don’t want to deal with that.
The ABSD must be paid by Singapore Citizens when they want to buy a second or subsequent residential home. A Singapore citizen would need to ensure that no additional residential properties were registered in their name at the time of purchase to avoid this.
By dividing their original property and giving each other their part, co-owners can prevent this issue and others. As a result, the property is owned by a single person and is not subject to the ABSD’s regulations for new home purchases.
But why would going to the hassle of decoupling property in Singapore be necessary? Why don’t you immediately buy the property under one of the couple’s names? But there is a valid explanation for this, and it relates to financing.
Banks need to ensure that the Total Debt Servicing Ratio (TDSR) is not exceeded by the amount they lend to a buyer. According to TDSR, a borrower’s total monthly loan obligations at the beginning of each month cannot exceed 55% of their gross monthly income.
The buying spouse can borrow more money than they could if they were buying the house separately, since the TDSR is determined using their combined gross term income. In other words, this 99-to-1 arrangement enables couples to use additional bank loans to buy their first real estate property and subsequent ABSD-free investment properties.
Is Decoupling Property Singapore Illegal? It’s not tax fraud, though. Do not forget that tax evasion is illegal. If you intentionally reduce or avoid your tax liability or receive tax refunds through illegal means, the legal ramifications exceed any “savings” you may be hoping to find.
