Introduction
1. Where a party (Vendor) enters into an agreement (Main Contract) to transfer any immovable property (Property) to another party (Initial Purchaser), and before having obtained a conveyance of the Property, the Initial Purchaser issues a direction in writing (Conveyance Direction) to the Vendor to convey or transfer that Property to another party (Ultimate Purchaser), stamp duty is payable on the Conveyance Direction.
2. This article examines the ways in which the Ultimate Purchaser may obtain remission of duty that is otherwise chargeable on Conveyance Directions, and where the land in question is purchased specifically by licensed housing developers as defined under the Housing Developers (Control and Licensing) Act (Cap. 130), for the purposes of housing development.
Buyer's stamp duty
3. The Buyer's Stamp Duty (BSD) is chargeable on the Conveyance Direction.
4. The applicable rate of BSD is 3% of the consideration or market value (whichever is higher) less a concession of S$5,400 if the value of the Property is above S$360,000.
Remission of BSD
5. Under the Stamp Duties (Conveyance Directions) (Remission) Rules 2015 (the CD Remission Rules), a party may apply for remission of BSD if the Commissioner is satisfied that:
(i) the Initial Purchaser entered into the Main Contract with the intention that the Property be transferred to the Ultimate Purchaser, which must be a company that is or is to be incorporated by the Initial Purchaser (Subsidiary);
(ii) no consideration is paid or agreed to be paid between the Initial Purchaser and the Ultimate Purchaser/ Subsidiary with regard to that Property;
(iii) duty had been duly paid upon the Main Contract;
(iv) the Conveyance Direction is made not more than two months after the date of the Main Contract; and
(v) the Initial Purchaser has and retains a "controlling interest" (as defined in the CD Remission Rules and reproduced in the Annex below) in the Ultimate Purchaser/ Subsidiary for the entire duration of the relevant period as follows:
(a) if, on the date of the Main Contract, there is a "development" on the Property that has yet to be completed, or there is to be a development by the Ultimate Purchaser/ Subsidiary on the Property that has yet to commence, the relevant period starts on the "material date" (as defined in the CD Remission Rules and reproduced in the Annex below) and ends on —
(1) the date of issue of the Temporary Occupation Permit (TOP) for the building that is the subject of the development; or
(2) if more than one TOP is to be issued for the building or buildings that is or are the subject of the development, or the parts of the building or buildings, the date of issue of the last of those TOPs;
6. IRAS has stated (for example, on its website at https://www.iras.gov.sg/irashome/Other-Taxes/Stamp-Duty-for-Property/Claiming-Refunds-Remissions-Reliefs/Remissions/Conveyance-Directions/ as of 27 June 2016) that it requires that "at the point of contract, there is a clear intention that the purchaser wants the property to be transferred to the company incorporated (or to be incorporated) by the purchaser".
7. As IRAS may require evidence of such intention in assessing an application for remission, it would be prudent for the Initial Purchaser and/or Ultimate Purchaser/ Subsidiary to determine at or prior to the Main Contract, whether or not the Initial Purchaser intends to incorporate a company to hold the Property and have readily available contemporaneous evidence of such intention (e.g. minutes of meeting or board papers or other memoranda).
Additional buyer's stamp duty
8. The Additional Buyer's Stamp Duty (ABSD) is chargeable on the Conveyance Direction where the Ultimate Purchaser is a company.
9. Where the Ultimate Purchaser is a company, the applicable rate of ABSD is 15% of the consideration or market value (whichever is higher) of the Property.
Remission of ABSD
10. In the specific case of licensed housing developers as defined under the Housing Developers (Control and Licensing) Act (Cap. 130), remission of ABSD may be available under the Stamp Duties (Housing Developers) (Remission of ABSD) Rules 2013 (G.N. No. S 362/2013) (the HD ABSD Remission Rules).
11. Under the HD ABSD Remission Rules, remission is available for chargeable instruments relating to a sale of residential property to a "qualifying developer" (as defined in the HD ABSD Remission Rules and reproduced in the Annex below) for the purpose of "housing development" (as defined in the HD ABSD Remission Rules and reproduced in the Annex below) by the qualifying developer and is to be executed on or after 8 December 2011.
Such remission is subject to the following conditions:
(i) If the purchaser is a qualifying developer, but is not a licensed housing developer, he is granted the licence within two years starting from the date of execution of the instrument;
(ii) The licence which the purchaser holds or (if he is not a licensed housing developer) which he is subsequently granted, authorises him to undertake housing development on the residential property in respect of which the instrument is executed;
(iii) The purchaser commences housing development on the residential property within two years starting from the date of execution of the instrument.
(iv) The purchaser completes the housing development, and sells all the units of housing accommodation that are the subject of the development within five years starting from the date of execution of the instrument.
(v) The purchaser provides to the Commissioner, within two years starting from the date of execution of the instrument or by such earlier or later date as the Commissioner may require or permit in any particular case —
(1) a copy of the purchaser's licence pursuant to the Housing Developers (Control and Licensing) Act (Cap. 130);
(2) a copy of the approval of the Controller of Residential Property referred to in section 31 of the Residential Property Act (Cap. 274) (if applicable) in respect of the housing development; and
(3) such other documents as the Commissioner may require to satisfy himself that the conditions under sub-paragraphs (iv), (v) and (vi) have been complied with.
(vi) The purchaser provides to the Commissioner, within five years starting from the date of execution of the instrument or by such earlier or later date as the Commissioner may require or permit in any particular case, a copy of the TOP or CSC in respect of the units of housing accommodation, and such other documents as the Commissioner may require to satisfy himself that the condition under sub-paragraph (vii) has been complied with.
(vii) The purchaser provides to the Commissioner on the date of execution of the instrument or by such later date as the Commissioner may permit in any particular case, a written undertaking to comply with all the conditions in sub-paragraphs (i) to (vi) above.
12. However in the specific situation where the Main Contract is subject to a Conveyance Direction, the Initial Purchaser will be subject to BSD on the Main Contract (BSD remission pursuant to the CD Remission rules under paragraphs 5 to 7 above only applies on the Conveyance Direction), and it would also normally be unable to qualify for ABSD remission on the Main Contract for the sale of residential property under paragraph 11 above, as it is not the legal entity undertaking the housing development and hence would not be able to meet the conditions for "qualifying developers" for the purposes of this particular residential property being purchased.
13. Nevertheless, under the HD ABSD Remission Rules, remission of ABSD will be allowed on both a Main Contract for the sale of residential property, and its accompanying Conveyance Direction subject to all of the following conditions:-
(i) The Ultimate Purchaser is a company and a qualifying developer, and satisfies paragraphs 11(i) to (vii) above from the date of the Main Contract.
(ii) The Initial Purchaser must have entered into the Main Contract with the clear intention at the onset that the property be transferred to another company (i.e. the Ultimate Purchaser) which the Initial Purchaser had at the date of the execution of the Main Contract, intended to be incorporated or has incorporated (ie. the Subsidiary) for the purpose of a housing development by the Subsidiary/ Ultimate Purchaser.
(iii) The Conveyance Direction for the conveyance or transfer of the property to the Ultimate Purchaser/ Subsidiary is made not more than two months starting from the date of the execution of the Main Contract.
(iv) No consideration passes between the Initial Purchaser and the Ultimate Purchaser/ Subsidiary for the conveyance or transfer.
(v) At all times between the date of the execution of the Main Contract and the date of issue of the TOP or Certificate of Statutory Completion (CSC) for all units of housing accommodation that are the subject of the housing development (both dates inclusive), the Initial Purchaser has a controlling interest in the Ultimate Purchaser/ Subsidiary similar to that set out in the CD Remission Rules (and as reproduced in the Annex below).
(vi) BSD must have been paid on the Main Contract.
14. We summarize the relevant BSD and ABSD remission implications discussed above in the table below:
| Main Contract |
Conveyance Direction |
|
|---|---|---|
| BSD | No remission available | Remission available under the CD Remission Rules (paragraphs 5-7 above) |
| ABSD | Remission available under the HD ABSD Remission Rules (paragraph 13 above) | Remission available under the HD ABSD Remission Rules (paragraph 11 above) |
15. From the above, it is clear that it is easier for a housing developer to qualify for BSD remission than ABSD remission for Conveyance Directions. To qualify for BSD remission, only a "development" on the Property is necessary (including any number of units of housing accommodation), and there is no requirement for the Ultimate Purchaser/ Subsidiary to be a qualifying developer. This is in contrast to the purpose of the Property being limited to "housing development", meaning a development of 5 or more units of housing, and also the Ultimate Purchaser/ Subsidiary being required to be a qualifying developer for ABSD remission on a Conveyance Direction. Furthermore, the Ultimate Purchaser/ Subsidiary has to satisfy the 2-year and 5-year conditions specified in paragraph 11(i) to (vii) above, in order to qualify for ABSD remission on a Conveyance Direction.
Seller's stamp duty
16. The Seller's Stamp Duty (SSD) is normally chargeable on the Conveyance Direction if the Conveyance Direction is issued within four years from the date of the Contract.
17. The applicable rates of SSD are as follows:-
(i) Holding period of 1 year : 16% of price or market value, whichever is higher
(ii) Holding period of 2 years : 12% of price or market value, whichever is higher
(iii) Holding period of 3 years : 8% of price or market value, whichever is higher
(iv) Holding period of 4 years : 4% of price or market value, whichever is higher
Remission of SSD
18. However, where the Ultimate Purchaser qualifies for remission of BSD on the Conveyance Direction subject to the conditions specified in the CD Remission Rules (and as set out in paragraph 5 above), the Initial Purchaser will similarly enjoy remission of SSD on the same Conveyance Direction.
Annex
The following terms bear these definitions in the Stamp Duties (Conveyance Directions) (Remission) Rules 2015:-
(i) "controlling interest", in relation to the ultimate purchaser, means —
(a) a beneficial interest in more than 50% of the shares in the ultimate purchaser; and
(b) holding more than 50% of the votes attached to the voting shares in the ultimate purchaser;
(ii) "development" means the construction of a building, including any building operations in, on, over or under the land for the purpose of erecting such building, and includes housing development;
(iii) "material date" means either of the following dates, whichever is the later:
(a) the date of the contract;
(b) the date of incorporation of the ultimate purchaser;
(iv) "Temporary Occupation Permit", in relation to a building or part of a building, includes the Certificate of Statutory Completion for the building or part (or a building that includes the part), but only if no Temporary Occupation Permit is issued for the building or part under the Building Control Act (Cap. 29).
The following terms bear these definitions in the Stamp Duties (Housing Developers) (Remission of ABSD) Rules 2013:-
(i) "develop", "housing accommodation", "licence" and "licensed housing developer" have the meanings given to those expressions in the Housing Developers (Control and Licensing) Act (Cap. 130);
(ii) "housing development" means the development of more than 4 units of housing accommodation;
(iii) "qualifying developer" means a company —
(a) which is a licensed housing developer; or
(b) which is an applicant for a licence and whose application is not refused, or which intends to apply for a licence.
About Dentons
Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
