The allure of owning a second property in Singapore can be dampened by the thought of Additional Buyer’s Stamp Duty (ABSD). However, there are strategic ways to avoid ABSD and still realize your property ambitions. This article delves into these strategies and sheds light on their practicality.
Understanding the Basics of ABSD
Before diving into how to circumvent it, a clear understanding of ABSD is essential. This tax, imposed on property purchases, varies depending on the buyer’s profile and the number of properties owned. For citizens, it applies on the second and subsequent properties. For Permanent Residents (PRs) and foreigners, ABSD rates are higher and kick in earlier.
Identifying Legal Loopholes
One method to avoid ABSD is by decoupling ownership of an existing property. In this approach, co-owners can transfer their share to another party, typically a spouse. This creates a scenario where only one person legally owns the first property, thus making it viable for the other party to purchase a second property without incurring ABSD.
Exploring Purchase Channels
An alternative route is to buy through a company. By setting up a private limited company in Singapore and purchasing the property under the company’s name, ABSD can often be avoided. This strategy, however, requires a comprehensive understanding of corporate taxation and legalities.
Utilizing Trusts for Property Ownership
Another effective strategy to avoid ABSD involves using a trust. Particularly useful for those planning to buy property for their children, placing the property under a trust can sidestep ABSD. It’s crucial to ensure that the trustee is a Singaporean and that the trust is irrevocable to legitimize the avoidance.
Legal and corporate fees when setting up a company.
Long-term tax implications of corporate ownership.
Trust creation and associated fees.
Gaining Exemptions
In specific scenarios, exemptions from ABSD are possible. These include properties purchased for housing overseas Singaporeans or under certain white-site developments. Thorough research and advice from property lawyers are highly recommended to understand eligibility.
Legal Compliance
However, while these methods illustrate how to buy a second property in Singapore without ABSD, the importance of adhering to legal requirements cannot be overemphasized. Breaching these laws can result in severe penalties, including fines and potential legal action. Always ensure transparency and compliance in property transactions.
By assessing these various strategies, it is possible to navigate the often complex property market in Singapore effectively. Each method has its own set of advantages and disadvantages, thus necessitating tailored approaches depending on individual circumstances.
Conclusion
Knowing how to avoid ABSD can open up opportunities for property investment without the burden of additional taxes. Whether through decoupling, purchasing via a company, utilizing trusts, or seeking exemptions, these strategies can make acquiring a second property on the island achievable and financially feasible.
