Singapore has one of the most robust real estate markets in the world. The government has put in place several measures to ensure that property prices remain stable and affordable for citizens. One such measure is the Additional Buyer’s Stamp Duty (ABSD), which was introduced in 2011 to cool down the property market.
What is ABSD in Singapore?
The Additional Buyer’s Stamp Duty (ABSD) is a tax imposed by the Singapore government on property buyers in addition to the standard Buyer’s Stamp Duty (BSD). It was first introduced in December 2011 as part of a package of measures aimed at cooling down the property market, particularly in response to rising demand from foreign buyers.
Under the ABSD scheme, buyers of residential properties in Singapore are required to pay an additional stamp duty on top of the BSD, which ranges from 5% to 35% of the property price. The exact rate of ABSD depends on the buyer’s profile, such as whether they are a Singapore citizen, a permanent resident, or a foreigner, and how many properties do they own in Singapore.
The purpose of the ABSD is to discourage speculative buying and curb excessive demand in the property market, particularly from foreign buyers. It also aims to encourage more stable, long-term investments in the Singapore property market by local buyers and investors.
It is important for property buyers to factor in the ABSD when budgeting for their property purchase, as it can significantly increase the total cost of the transaction. The ABSD must be paid within 14 days of signing the Sales and Purchase Agreement.
Who Is Required To Pay And How Much Is The ABSD In Singapore?
In Singapore, certain property buyers are required to pay the Additional Buyer’s Stamp Duty (ABSD) on top of the standard Buyer’s Stamp Duty (BSD) when purchasing residential properties. The following are the groups of buyers who are subject to ABSD:
Non-Singaporean citizens who purchase any residential property in Singapore are required to pay ABSD.
Singapore Permanent Residents (PRs)
PRs are required to pay ABSD on their 1st and subsequent residential property purchases in Singapore.
Singapore Citizens (SCs)
SCs are required to pay ABSD on their 2nd and subsequent residential property purchases in Singapore.
The ABSD rates vary depending on the buyer’s profile and the number of residential properties they already own in Singapore or overseas. For example, the ABSD rate for foreigners purchasing their first residential property in Singapore is 30% of the property’s purchase price, while the ABSD rate for Singapore citizens purchasing their third and subsequent residential properties is 25% of the property’s purchase price.
It is important for property buyers to carefully consider their ABSD liability when budgeting for their property purchase, as it can significantly increase the total cost of the transaction.
How To Calculate The ABSD Amount For A Property Purchase?
The ABSD amount for a property purchase can be calculated by multiplying the applicable ABSD rate with the purchase price of the property. For example, if a foreigner is buying their first residential property in Singapore, they will have to pay 30% of the purchase price as ABSD. Therefore, if they are purchasing a property with a purchase price of S$1 million, their ABSD amount will be S$300,000.
Why Was ABSD Introduced In Singapore?
The Additional Buyer’s Stamp Duty (ABSD) in Singapore was introduced as part of a package of measures aimed at cooling down the property market, particularly in response to rising demand from foreign buyers. The key purposes and objectives of ABSD are as follows:
To Discourage Speculative Buying
ABSD aims to discourage speculative buying of residential properties, particularly by foreign buyers. The additional tax imposed on top of the standard Buyer’s Stamp Duty (BSD) makes it more expensive for such buyers to enter the market and limits their ability to profit from short-term price fluctuations.
To Curb Excessive Demand In The Property Market
ABSD helps to curb excessive demand in the Singapore property market by creating a higher barrier to entry for certain types of buyers. This helps to moderate property prices and makes it more affordable for Singapore citizens and permanent residents to buy residential properties.
To Encourage Stable, Long-Term Investments
By discouraging short-term speculative buying, ABSD aims to encourage more stable, long-term investments in the Singapore property market by local buyers and investors. This promotes a more sustainable and healthy property market in the long run.
To Generate Revenue For The Government
ABSD is a form of tax revenue for the Singapore government. The additional stamp duty collected from property transactions can be used to fund various government initiatives, such as social welfare programs and infrastructure development.
How Has ABSD Impacted The Singapore Property Market?
The Additional Buyer’s Stamp Duty (ABSD) has had a significant impact on the Singapore property market since its introduction in December 2011. The following are some of the ways that ABSD has affected the market:
Slower Price Growth
The imposition of ABSD has contributed to slower price growth in the Singapore property market, particularly in the high-end segment. The additional tax makes it more expensive for foreigners and investors to enter the market and limits their ability to profit from short-term price fluctuations. As a result, property prices have grown at a more moderate pace, which has helped to make housing relatively affordable for Singaporeans.
Increased Affordability For Singaporeans
The ABSD has helped to increase affordability for Singapore citizens and permanent residents by limiting the demand from foreign buyers and investors. This has allowed more Singaporeans to enter the property market, particularly in the mass-market and mid-tier segments.
Dampened Foreign Investment
The ABSD has had a significant impact on foreign investment in the Singapore property market. The additional tax has made it less attractive for foreign buyers to invest in Singapore residential properties, particularly in the high-end segment. This has resulted in a lower percentage of foreign buyers in the market, which has helped to stabilize prices.
Boosted Government Revenue
The ABSD has generated significant revenue for the Singapore government. The additional stamp duty collected from property transactions has been used to fund various government initiatives.
Overall, the ABSD has been successful in promoting a stable and sustainable property market in Singapore. The additional tax has helped to moderate price growth, increase affordability for Singaporeans, and limit speculative buying and foreign investment. While it has made it more expensive for certain types of buyers to enter the market, it has helped to ensure that the Singapore property market remains accessible to Singaporeans and remains an attractive long-term investment option.
How To Avoid Or Minimize ABSD In Singapore?
While it is not possible to completely avoid or eliminate ABSD in Singapore, there are several strategies that property buyers can use to minimize their liability. One of the ways is Decoupling. Buyers should consult with a professional property advisor to understand their ABSD liability and explore the various options available to them.
The Role Of Property Agents In Helping Buyers Navigate ABSD Requirements
Navigating the Additional Buyer’s Stamp Duty (ABSD) requirements can be a complex and confusing process for property buyers in Singapore. Property agents play an important role in helping buyers understand and comply with ABSD regulations. Here’s a look at how property agents can assist buyers in navigating ABSD requirements:
Provide Information And Advice
Property agents can provide buyers with valuable information on ABSD requirements, including the applicable rates, exemptions, and deadlines. They can also offer advice on strategies to reduce ABSD liability.
Assist With Documentation And Paperwork
Property agents can assist buyers with preparing the necessary documentation and paperwork required for ABSD compliance, such as the ABSD declaration form, Option to Purchase, and Sales and Purchase Agreement. They can also help ensure that the documentation is complete and accurate to avoid any delays or penalties.
Liaise With Government Agencies
Property agents can liaise with government agencies on behalf of buyers to facilitate ABSD compliance. For example, they can assist with the submission of ABSD declaration forms to the Inland Revenue Authority of Singapore (IRAS) and provide updates on the status of ABSD applications.
Negotiate On Behalf Of Buyers
Property agents can negotiate on behalf of buyers to reduce ABSD liability. For example, they can negotiate with the seller to lower the purchase price or request for the seller to absorb some or all of the ABSD liability.
Ensure Compliance With Legal And Ethical Standards
Property agents have a responsibility to ensure that buyers comply with legal and ethical standards when navigating ABSD requirements. They can advise buyers on the legal and ethical implications of various strategies to reduce ABSD liability and ensure that all parties involved in the transaction act in accordance with the law.
Property agents play an essential role in helping buyers navigate the ABSD requirements in Singapore. They provide valuable information and advice, assist with documentation and paperwork, liaise with government agencies, negotiate on behalf of buyers, and ensure compliance with legal and ethical standards. Buyers should consider engaging the services of a reputable and experienced real estate agent to assist them in navigating ABSD requirements.