As of today, some of us still have difficulty getting those taxes, particularly property stamp duty payments, right.
Ignorance is not bliss; the penalties for committing mistakes can be costly.
Documents that are not stamped or those with an insufficient stamp duty can attract penalties of up to four times the undercharged amount.
Stamp duty is paid on documents or agreements relating to immovable property such as tenancy or lease agreements, acceptance of options to purchase, and sale and purchase agreements. Duty is also payable on share transactions.
One of the most noteworthy levies is the Additional Buyer’s Stamp Duty (ABSD) introduced in December 2011 to help cool the property market. This levy is paid on top of the existing buyer’s stamp duty. The rate depends on whether the buyer is a Singapore citizen, a permanent resident, a foreigner or an entity like a trustee. The number of residential properties the buyer owns is also factored in.
An ABSD of 7 per cent to 10 per cent is imposed for Singaporeans buying their second or subsequent properties. Foreigners pay more.
Close to 40 out of 437 stamp duty audit cases uncovered in the three years to March 31 this year involved non-compliance of the ABSD, said the Inland Revenue Authority of Singapore (Iras).
To ensure that you do not get caught in such unwanted situations, below are some common scenarios of non-compliance that you should take note of.
Common scenarios of non-compliance
- TRANSFER OF PROPERTY BY WAY OF GIFT – WRONG BASIS OF CALCULATING THE STAMP DUTY
Stamp duty should be based on the market value when a property is transferred by way of gift.
As a recipient of a gift property, you are liable to pay stamp duty on the property’s reasonable market value.
Failure to comply will result in substantial fine by IRAS.
- MISCONCEPTION THAT STAMP DUTY IS NOT REQUIRED FOR RENTAL OF ROOMS, SUBLETTING AND LEASE RENEWALS
There are instances where tenancy agreements were not stamped for rental of rooms, rental of whole units and renewal of leases.
Stamp duty is payable on signed documents for subletting and/or renewal of lease.
Both landlord and tenants should ensure tenancy agreements for rental of rooms or whole units and lease renewals are stamped.
- OWNERSHIP OF OTHER PROPERTIES AT TIME OF PURCHASE
Some taxpayers indicated ignorance, or did not inform their lawyers of other residential properties that they own. This resulted in the wrong ABSD rate being applied.
As the ABSD rate depends on the number of residential properties owned, buyers should consider all such properties in the property count, including those that are:
- Completed or under construction;
- Owned wholly by the buyer or jointly with others;
- Transferred to the buyer by way of gift or inheritance; and
- Held in trust where the buyer is the beneficiary stated in the trust instruments.
When in doubt, you can seek advice from your lawyers or Iras to determine your total property count.
- MISCONCEPTIONS ON PROPERTY AND LAND USE
There were instances where buyers regarded mixed-used properties as commercial properties and so mistakenly thought the ABSD would not apply. In mixed-used properties such as HDB shops with living quarters, the ABSD applies to the portion deemed residential.
You can verify your ABSD obligations with Iras or your lawyers for the purchase of mixed-use properties, buildings under construction and vacant land or entire building with land.
- INACCURATE ADVICE GIVEN BY INTERMEDIARIES
Intermediaries such as property agents and lawyers have given inaccurate advice on the ABSD to their clients.
It is highly recommended that you conduct your own due diligence to ensure that the tax payable is in accordance to IRAS’s regulations.
- STAMP DUTY FRAUD – FORGERY OF STAMP CERTIFICATES
It is a crime for any individual or business to deliberately forge stamp certificates and knowingly misrepresent counterfeit “certificates” as genuine. The maximum punishment is jail of up to three years or a fine of up to $10,000 or both.
Iras advises potential property buyers and tenants to check the authenticity of the stamp certificates in their possession by visiting the e-Stamping website at https://estamping.iras.gov. sg
An authentic certificate should bear the full details: the stamp duty payment, description of the document, address of the property, stamp duty amount and date of the document.
All these details, including the Stamp Certificate Reference Number, should match the information on the e-Stamping website.
Ensure that your stamp certificates are authentic by referring to the e-Stamping website.
All involved parties in the transaction should also request for a copy of the stamp certificate for safe keeping.
In the event of legal disputes, the document must be duly stamped before it can be admitted as evidence in court.