This week has been an "eventful" week for homebuyers who are looking to avoid tax for multiple property to take note as IRAS has been formally addressing the "grey" loophole or method, where many home investors/buyers are using to procure multiple properties while paying minimum tax (much less than what it is legally required)
Known as "99-1", this is a method where one enter a co-ownership while allowing the other to help finance the property/while only incuring ABSD for "1%"of the share. Here is a summary for the 4 important articles to take note of:
IRAS probes home buyers who used '99-to-1' loophole to avoid paying ABSD
- The Straits Times reports that the Inland Revenue Authority of Singapore (IRAS) has launched an investigation into homebuyers who have used the "99-to-1" loophole to avoid paying Additional Buyer's Stamp Duty (ABSD).
- The loophole involves purchasing a property in a 99-to-1 share, with the buyer owning the 1% share and the seller owning the 99% share.
- Can potentially allow the buyer to avoid ABSD, which is a tax on residential property purchases.
- IRAS is scrutinizing these transactions and may take action against those who have used the loophole to avoid paying taxes.
Why '99-to-1' property deals to avoid ABSD have zero chance of success
- The Inland Revenue Authority of Singapore (IRAS) has issued guidelines that state that the ownership share of the property will be determined by the amount paid for the property.
- This means that if the buyer pays 1% of the purchase price, they will only own 1% of the property, regardless of the shares stated in the sale and purchase agreement.
- The article also notes that the Singapore Land Authority (SLA) has said that it will not register any transactions that attempt to use the 99-to-1 loophole to avoid ABSD.
The risks of buying properties in '99-to-1' share
- Discusses the risks associated with purchasing properties in 99-to-1 shares. The article notes that buying a property in 99-to-1 shares means that the seller retains a 99% stake in the property, which may make it difficult for the buyer to sell or refinance the property.
- Additionally, the buyer may not have the same legal rights as a sole owner of the property, which could lead to disputes between the buyer and seller.
Only first-time buyers can own homes in '99-to-1' shares from the start
- explains that only first-time buyers are allowed to own homes in 99-to-1 shares from the start. This is because the Singapore government has introduced measures to make it harder for investors to purchase residential properties and has restricted the use of the 99-to-1 loophole to first-time buyers only.
- The article notes that this measure is intended to ensure that homes remain affordable for Singaporeans and that first-time buyers are not disadvantaged in the property market.
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