Monday, January 28, 2013

Residential property buys via SPV may not escape ABSD

Special purpose vehicle arrangements may be disregarded, says IRAS

The Straits Times
January 26, 2013

CORPORATE entities seeking to avoid paying the additional buyers' stamp duty (ABSD) by buying shares in special purpose vehicles that own properties could come under the scrutiny of the tax authorities.

The Inland Revenue Authority of Singapore (IRAS), in a letter responding to a Business Times article on such deals, said: "When the company buys a residential property, it will be subject to ABSD, and at the highest ABSD rate of 15 per cent. Under the Stamp Duties Act, the Commissioner of Stamp Duties may disregard or vary any arrangement to counteract any reduction in or avoidance of duty payable by that person.

"The Inland Revenue of Authority of Singapore audits stamp duty transactions to detect transactions that are conducted for tax avoidance purposes."

Transaction of real estate through SPVs is not a new phenomenon; funds in particular are known to do it. But the government's latest move to raise the ABSD to a hefty 15 per cent from 10 per cent for corporate entities has made it more attractive for companies to consider this route.

This is because the ABSD applies only when investors buy the units of a development directly, but it does not apply when the transaction is through the sale of shares in companies - even if they own real estate.

Experts had said therefore that this would be especially attractive for corporate entities, especially those looking to purchase luxury residential property.

On Tuesday, Savills placed an ad in BT for the sale of 36 units at Goodwood Residence through an SPV that owns the apartments. Then on Wednesday, Jones Lang LaSalle put on the market 21 Anderson, Royal Oak Residence, with a similar arrangement as one of the available purchase options.

JLL said: "Whilst the vendor is selling the asset, potential investors may also consider acquiring shares in the company that owns the property, thereby realising Additional Buyers' Stamp Duty (ABSD) savings."

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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