Most likely, you and your spouse want to purchase a second property in Singapore, but you don’t want to pay the hefty Additional Buyer’s Stamp Duty (ABSD) tax that comes with having two properties. You run a Google search to find out more about Decoupling Property Singapore and whether there are any workarounds.
Because it enabled couples to purchase “ABSD-free” investment properties, Property Decoupling was first viewed as the “holy grail” option in Singapore. However, the Inland Revenue Authority of Singapore (IRAS) stated that split 99-to-1 homeownership agreements would be looked into.
The two may find themselves liable for an unpaid stamp duty bill, as well as a 50% fee on the excess duty owed, if it is discovered that this arrangement is artificial or fraudulent. You don’t want to deal with that anyway.
When Singapore Citizens seek to buy a second or subsequent residential property, they must pay the ABSD. To prevent this, a Singapore citizen would need to ensure that no additional residential properties were registered in their name at the time of purchase.
Co-owners can avoid this problem and others by splitting their original property and giving each other a share. A single individual, therefore, owns the property and is exempt from the ABSD rules governing the purchase of new homes.
However, why would it be essential to go through the trouble of decoupling the property in Singapore? Why don’t you immediately buy the property under one of the couple’s names? However, there is a good reason for this, and it has to do with funding.
Banks need to ensure that the amount they lend a buyer does not exceed the Total Debt Servicing Ratio (TDSR). A borrower’s total monthly loan obligations at the start of each month cannot exceed 55% of their gross monthly income under TDSR.
Since the TDSR is calculated using their combined gross term income, the buying spouse can borrow more than they could if they were purchasing the house individually. To put it another way, this 99-to-1 arrangement allows couples to buy their first real estate property and subsequent ABSD-free investment properties using extra bank loans.
Is It Illegal to Decoupling Property in Singapore? But it’s not tax fraud. Remember that it is illegal to evade taxes. Any “savings” you may have hoped to find are greatly outweighed by the legal repercussions if you purposefully lower or evade your tax liability or gather tax refunds illegally.