Additional Buyer's Stamp Duty (ABSD) in Singapore, explained (2023)

Once in a while, 99.co picks a piece of property jargon to explain it. Today we look at the notorious ABSD, which is a stamp duty (tax) on your house.

Additional Buyer’s Stamp Duty (ABSD)

The most notorious of the cooling measures, the Additional Buyer’s Stamp Duty (ABSD) is a stamp duty paid on your residential property. The cost is a percentage of your property price or valuation, whichever is higher.

For example, say you’re buying a residential property valued at $2 million. The seller’s price, however, is $2.1 million. If this is your second residential property, as a Singaporean, you’re subjected to an ABSD rate of 20 per cent. This means you would need to pay a stamp duty of 20 per cent of $2.1 million (that’s $420,000).

The amount payable varies, based on:

• Your citizenship or residency status
• The number of residential properties you own
• Whether you’re an individual, an entity or developer

^Excluding Nationals and Permanent Residents of Iceland, Liechtenstein, Norway and Switzerland, and Nationals of the United States of America, who will be subject to the same ABSD rate as Singaporeans.

*The ABSD rate for trustees was from May 9, 2022 to April 26, 2023. 

What if you’re purchasing the property with another person?

If you’re jointly buying the house with another person with a different profile (eg. different residency status and/or number of houses owned), you’ll be subjected to a higher ABSD rate.

SC-PR buyer with no residential properties 

Let’s say you’re buying a S$2 million condo with your partner, who is a PR. This is the first property for both of you as an unmarried couple. However, given your partner’s PR status, both of you will be subjected to a 5% ABSD rate. This means that the ABSD to be paid will be S$100,000.

SC-SC buyer, with one buyer owning a house

Likewise, if both you and your partner are Singaporeans, and your SO has another property to their name, you’ll be subjected to the higher rate. In this case, both of you will be subjected to an ABSD rate of 20 per cent. So the ABSD to be paid will be $400,000.

Here’s an infographic summarising how to calculate the ABSD. 

But if you’re married already, you may be eligible for the ABSD remission.

What is ABSD remission, and how do you get it?

You can apply for ABSD remission if

1. You are a married couple in Singapore,  
2. At least one spouse is a Singapore Citizen
3. Jointly purchase the property 

 If you purchase a second house, you’ll first have to pay the ABSD as usual (this is within 14 days of the date of purchase). However, you can apply for a remission if you sell your first home within six months of buying the second one.

For example, say you just got married, and upgrading from your shoebox unit to a bigger condo unit. For convenience, you purchase the condo unit before you sell your shoebox apartment.

You would have to pay the ABSD within 14 days of signing the Option to Purchase (or Sale and Purchase Agreement if no OTP is issued) to buy the condo unit. You can then apply to get the money back if you sell your shoebox within six months of getting your condo.

Note that you must remain married at the time you apply for the remission, and you must not have bought more properties before applying.

Hold on, what if the second property is still being built?

If the second property is under development (eg. a new launch condo), you must sell your first house within six months of the second property getting its Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC), whichever is earlier.

Why do we have ABSD?

ABSD serves various purposes.

Firstly, it applies downward pressure on property prices. When the government feels that private property prices are getting out of hand, they increase the ABSD to slow the price increase. This prevents the formation of property price bubbles, which can wreak havoc on the local economy.

Given the price increase in the last couple of years, the government raised the ABSD rate in December 2021. 

While this had a moderating effect on the property market, prices are still on the rise, prompting the government to increase the ABSD rates again in April 2023.

A second purpose is to create an ownership bias, ensuring most of Singapore belongs to, well, Singaporeans. That’s why the stamp duty is steeper for companies and most foreigners.

(Under the Free Trade Agreements with the respective countries, Nationals and Permanent Residents of Iceland, Liechtenstein, Norway and Switzerland, and Nationals of the United States of America, will be subject to the same ABSD rates as Singaporeans. This means they won’t have to pay 60 per cent for their first home purchase here.) 

A third reason arose during the en-bloc fever of 2017. At the time, foreign developers caused a huge surge in en bloc sales. This artificially injected huge amounts of cash into the property market, and could later have translated to excessive supply and inflated home prices (the more developers pay for land, the more their properties cost).

In response, the ABSD has become especially high on property developers, to put the brakes on land purchases and en bloc sales. For instance, developers are now subjected to an ABSD rate of 40%. While the 5% is non-remittable, the 35 per cent is remittable if they can finish construction and sell all the units within five years.

It’s also why we see some developers giving discounts for condos that are nearing their ABSD deadlines.

ALSO READ: New 2023 property cooling measures: Will 60% foreigner ABSD really affect Singapore's property market?

Does ABSD matter to the average Singaporean, who doesn’t own more than one house?

ABSD is indirectly keeping your home affordable. It’s less great in that if you’re moving to a new house, it can cause cash flow issues.

(This isn’t an issue if you’re moving from an HDB flat to another HDB flat, or a new EC, since you won’t have to pay the ABSD.)

For example, say you’ve lived in a shoebox unit all your life, but now you’ve gotten married. You need a bigger condo unit. Well, if you buy a condo unit before selling your old shoebox, you’ll have to pay the 20% ABSD within 14 days of making the purchase.

You can apply to get the money back, but this can only be done if you sell your old shoebox within six months of buying your new, bigger condo. Any disruption to the process — such as buyers pulling out at the last minute — can inadvertently cause you to forfeit the ABSD remission.

There’s also the annoying fact that you need sufficient cash to pay for the ABSD first when you’re already forking out huge sums for a new house (although ABSD can be paid through your CPF).

For these reasons, you may want to sell your old house before buying a new one, however inconvenient it may seem.

Can you avoid the ABSD?

Technically, no, you can’t. But there are a few ways to get around the ABSD legally. These include decoupling and buying a property in a trust. Nevertheless, there are a few pitfalls to these strategies.

For instance, with decoupling, you may end up paying more than the ABSD itself. This is because you have to incur legal fees for the decoupling itself. Your partner will also have to pay the BSD to buy your share. So be sure to do the math first before jumping into decoupling.

As for buying a property under a trust, this entails putting it under your child’s name (since your child doesn’t have a property to their name yet). One downside to this is that you’ll have to pay the property in cash. And when your child decides to buy a property on their own in future, they’ll have to pay the ABSD.

However, since May 9, 2022, those buying under a trust will be subject to ABSD, with the rate initially implemented at 35 per cent, before increasing to 65 per cent in this latest round of cooling measures. They can still apply for a remission, but they’ll have to first pay the ABSD and meet the following conditions:

• All beneficial owners of the residential property must be identifiable individuals (i.e. you cannot transfer it to an unborn child)
• The beneficiary owner must own the property now and not in future; and
• The trust deed cannot be changed or revoked, or come with any conditions eg. the child will only own the house when they get married, so it must be a genuine gift to the beneficiary

Alternatively, you won’t be subjected to the ABSD if you’re buying a new EC (since you have to dispose of the existing property) or a commercial property.

This article was first published in 99.co.