Is it by any chance that you and your spouse are considering buying another property in Singapore but don’t want to pay the huge Additional Buyer’s Stamp Duty (ABSD) tax for owning multiple properties. You undertake a Google search to see if there are any workaround and learn about Decoupling Property Singapore.
Property decoupling in Singapore was previously regarded as a ‘holy grail’ solution that made it possible for couples to buy ‘ABSD-free’ investment properties. But the inland Revenue Authority of Singapore (IRAS) announced it would investigate homeownership arrangements split in a 99-to-1 ration.
When this arrangement is deemed; contrived or artificial,’ couples could find themselves being charged with a bill of unpaid stamp duty and a 50% surcharge on the additional duty payable too. Well, that’s the last thing you want to make do with.
Singapore Citizens looking to buy a second or subsequent residential property are liable to pay ABSD. To prevent this from happening, a Singapore Citizen would need to ensure there are no other residential properties in their name at the time of purchase.
To navigate around this, co-owners, decouple their first property by transferring their share to the other co-owner. This makes one person the sole homeowner of the current home, freeing up the other to purchase another property without incurring ABSD.
But why to go to the trouble of Decoupling Property Singapore, you might ask? Why not buy the property in one spouse’s name from the get-go? Well, there is a good reason behind this: financing.
Banks need to ensure that any amounts they lend buyers don’t exceed the Total Debt Servicing Ration (TDSR). TDSR limits a borrower’s total monthly debt repayments to a maximum of 55% of the borrower’s gross monthly income.
Purchasing a home as a couple instead of as an individual means both spouses’ combined gross monthly income will be used in the calculation of the TDSR, allowing them to borrow more. TLDR, this 99-to-1 scheme allows couples to borrow more money from banks when initially buying the property and later buy ‘ABSD-free’ investment properties.
That said, is Decoupling Property Singapore illegal? Answer: no, but tax evasion is. It is important to note that tax evasion is illegal. Intentionally reducing or avoiding your tax liability or obtaining tax refunds through illegal means opens you up to many legal consequences, all more severe than the ‘savings’ you may be trying to find, even via legal ‘loopholes’.
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