'99-to-1' stamp duty tax avoidance case: Mum and son charged with giving false info to Iras

A mother-and-son duo is facing charges for giving false and misleading information to the Inland Revenue Authority of Singapore (Iras) during its audit of cases of the so-called "99-to-1" arrangement for private properties.

This is the first prosecution of taxpayers providing false and misleading information to Iras during its investigation into the two-step "99-to-1" property transactions for possible tax avoidance, said the agency in a statement on Friday (Sep 20).

The mother, 56-year-old Ng Chiew Yen, and her son, 26-year-old Keith Tan Kai Wen, face five charges each. They are both Singaporeans.

Investigations revealed that Tan bought a condominium unit at the 99-year leasehold The Watergardens at Canberra in Sembawang in his sole name on Sep 24, 2021, said Iras. He subsequently sold a 1 per cent share of the property to his mother.

Data from URA Realis showed that the fourth-floor unit, 753 sq ft in size, was transacted on Aug 28, 2021, for S$1.1 million, or S$1,477 a square foot.

Iras commenced an audit into the transactions in 2023. During the audit, it asked Tan why he did not purchase the property jointly with Ng from the outset. He allegedly falsely stated that he had made a hasty decision to buy the property, on the assumption that his family would support him financially. But he said his family was unable to do this, so Ng had to be added as an owner in order to take a loan.

Tan was also accused of providing misleading information to Iras, through incomplete WhatsApp messages, and in other "false and misleading" responses to the agency during the audit.

Both Tan and Ng were handed five charges each for allegedly conspiring to provide misleading information and responses to Iras. If convicted, they could each be fined up to S$10,000 or jailed for up to two years, or both.

If Iras determines that tax avoidance has taken place, it will recover the rightful amount of stamp duty from the buyers, and may also impose a 50-per-cent surcharge of the additional duty payable. There is no statutory time limit for stamp duty audits.

Based on a purchase price of S$1.1 million, the Additional Buyer's Stamp Duty (ABSD) payable by a Singaporean for a second property would be around S$220,000; the ABSD sum would be about S$330,000 for a third or subsequent property. No ABSD is charged if it is the buyer's first property.

Tax avoidance

This is one of the 166 cases of private home purchases involving the use of the "99-to-1" or similar arrangements to dodge ABSD, which Iras had uncovered as at April 2024. About S$60 million in ABSD and surcharges will be clawed back from these cases.

The "99-to-1" arrangement is a tax-avoidance arrangement used by some property buyers to reduce the ABSD rightfully payable on the purchase of a residential property.

It typically involves individuals, who have no prior properties to their name, buying residential properties in their sole name initially, and then selling a small share of the property soon after to someone else with a higher ABSD profile.

By structuring the transaction this way, ABSD would be payable only on the 1 per cent share of the property, instead of on the full value of the property had the purchase been done jointly at the onset.

Iras said audits are conducted regularly on taxpayers for property transactions to detect non-compliance and tax avoidance. The probe into the "99-to-1" arrangement is part of this audit to uncover transactions entered into for the purpose of reducing or avoiding stamp duty.

"Whether a case is deemed to be tax avoidance depends on the facts and circumstances of each case," it added.

Individuals who are in a "99-to-1" property-purchase arrangement should voluntarily disclose it, it added. "Depending on the circumstances, Iras is prepared to consider such cases more favourably."

A reward based on 15 per cent of the tax recovered — capped at S$100,000 — is offered to whistleblowers who call out those in such arrangements to evade or reduce their ABSD. This is provided the information and/or documents provided leads to a recovery of the tax that would have otherwise been lost, said Iras.

[[nid:630272]]

This article was first published in The Business Times. Permission required for reproduction.