29 September 2022
The Stamp Duties (Amendment) Act 2022 (“Amendment Act”) has been gazetted and is deemed to have come into operation on 10 May 2022. The Amendment Act:
- introduces the Additional Conveyance Duties for Trust (“ACD (Trust)”); and
- imposes stamp duty in relation to the renunciation of interest by a beneficial owner in residential property that is held on a 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.
To determine whether ACD (Trust) applies to the acquisition of equity interests in a PHE that are to be held on trust for beneficiaries who are not identifiable beneficial owners, the Inland Revenue Authority of Singapore (“IRAS”) 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 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 Stamp Duties (Amendment) 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.
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
Conveyance of equity interests to trust beneficiary
Where the trustee transfers equity interests in PHEs 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 Amendment Act 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.
Stamp duty on the renunciation of interest in trust over residential property is applicable to any residential property transferred to be held on trust on or after 10 May 2022, where the beneficiary of the trust is identifiable and has beneficial ownership of the trust residential property, i.e. the residential property is held on bare trust.
It is explained on the IRAS website that the renunciation by the beneficiary results in a change in beneficial owner of the trust residential property, as the beneficial ownership of the trust residential property is transferred back to the settlor. Stamp duty is payable both on the disposal and acquisition of the beneficial interest in the trust residential property as follows:
- If the beneficiary renounces his interest in the trust residential property within the Seller’s Stamp Duty (“SSD”) holding period, the beneficiary is liable to pay SSD on the renunciation; and
- The settlor is liable to pay Buyer’s Stamp Duty and Additional Buyer’s Stamp Duty (if applicable).
The beneficiary renouncing their interest in the trust residential property has to complete the Section 22C Notice. The Section 22C Notice will be the chargeable instrument for stamp duty purposes, and is to be served to both the settlor and the Commissioner of Stamp Duties.
The following subsidiary legislation are available from Singapore Statutes Online sso.agc.gov.sg:
- Stamp Duties (Amendment) Act 2022
- Stamp Duties (Section 23) (Amendment) Order 2022
- Stamp Duties (Section 22C Notices) Rules 2022
- Stamp Duties (Transfer of Interest in Property which Buyer has Interest) (Remission of ABSD) (Amendment No. 2) Rules 2022
- Stamp Duties (Spouses) (Remission of ABSD) (Amendment No. 2) Rules 2022