28 July 2022
On 5 July 2022, the Stamp Duties (Amendment) Bill (“Bill”) was passed in Parliament. The Bill seeks to:
- introduce the Additional Conveyance Duties for Trust (“ACD (Trust)”); and
- impose stamp duty in relation to the renunciation of interest by a beneficial owner in residential property that is held on trust.
When in force, the changes in the Bill will be deemed to have taken effect on 10 May 2022.
Previously, when residential property was transferred into a living trust with no identifiable beneficial owner of the property at the time of transfer, Additional Buyer’s Stamp Duty (“ABSD”) did not apply. Additional Buyer’s Stamp Duty for Trust (“ABSD (Trust)”) was introduced on 8 May 2022 and took effect on 9 May 2022 to close this loophole.
ACD (Trust) follows from the introduction of ABSD (Trust). With ACD (Trust), Additional Conveyance Duties (“ACD”) may apply when equity interests in a property holding entity (“PHE”) are transferred into a living trust, regardless of whether there is an identifiable beneficial owner of those interests at the time of transfer.
These changes ensure similar stamp duty treatment for transfers of residential property or equity interests in a PHE, whether acquired directly or through a trust.
To determine whether ACD (Trust) applies to the acquisition of equity interests in a PHE that are to be held on a trust for beneficiaries who are not identifiable beneficial owners, the Inland Revenue Authority of Singapore will consider the equity interests in the PHE that are to be held by the trustee of the trust for those beneficiaries. ACD (Trust) will apply in such a case only if the trustee is a significant owner with at least 50% equity interests or voting power in the PHE or becomes one after the acquisition.
It is explained in the speech delivered at the second reading of the Bill that in determining whether the trustee is a significant owner of the PHE, the equity interests that are beneficially owned by the trustee’s associates will be treated as beneficially owned by the trustee. Where a trustee holds equity interests for a beneficiary who is not an identifiable beneficial owner of those interests at the time of their transfer into the trust, such a beneficiary is considered an associate of the trustee in determining whether the trustee is a significant owner. This definition of “associates” will be provided for in subsidiary legislation.
If ACD (Trust) applies, the trustee will be liable to pay ACD (Trust) at the prevailing ACD rates of up to 44% for buyers, comprising 40% ABSD and up to 4% Buyer’s Stamp Duty.
ACD (Trust) may also apply if the trustee, being a significant owner of a PHE, disposes of the trustee’s equity interest that were held on trust for a beneficiary who is not an identifiable beneficial owner. If the trustee disposes of the equity interest within three years after acquiring them, the trustee will be liable to pay ACD at the prevailing ACD rate of 12% for sellers, equivalent to the highest rate of Seller’s Stamp Duty.
Conveyance of equity interests to trust beneficiary
Where the trustee transfers equity interests to a beneficiary of the trust who was not an identifiable beneficial owner of those interests at the time they were transferred into the trust, the beneficiary will be liable to pay the prevailing ACD for buyers if the beneficiary is a significant owner or becomes one after the transfer.
Renunciation of interest in residential property held on trust
The Bill introduces a new section 22C which deals with a case where a settlor declares a bare trust over residential property, and a beneficiary of the trust renounces the beneficiary’s interest in the residential property, which then gives rise to a resulting trust in favour of the settlor of the renounced interest. The beneficiary must within the prescribed period give a notice to the Commissioner of Stamp Duties (“Commissioner”) of the applicability of the new section 22C to the renounced interest, failing which the Commissioner may issue the notice to the beneficiary and the settlor. The notice is chargeable with Buyer’s Stamp Duty and, where applicable, ABSD, as if it were a conveyance or transfer operating as a voluntary disposition inter vivos of the renounced interest. Such duty is payable by the settlor. The notice is also chargeable with Seller’s Stamp Duty if the renunciation is made within the specified holding period under section 22A. Such duty is payable by the beneficiary.
This treatment for the renunciation of interest by a beneficial owner will ensure that where the beneficial ownership of a trust residential property reverts to the settlor, the settlor would have to pay stamp duty as if he or she had acquired the property directly.