The Ministry of Finance announced an additional buyer’s stamp duty (ABSD) of 35 per cent last Sunday, analysts say this will hurt the ultra-wealthy. The ABSD applies to any transfer of residential property into a living trust and takes effect for transfers beginning from May 9 (Monday).
MOF explained in a statement that “when a residential property is transferred into a living trust, Buyer’s Stamp Duty (BSD) is payable. ABSD may also be payable, depending on the profile of the beneficial owner(s) of the residential property transferred into the trust.”
It added, “ABSD aims to promote a stable and sustainable residential property market, and as such, it should apply to transfers of residential properties into all living trusts, irrespective of whether there are identifiable beneficial owners of the residential properties transferred into such trusts.”
In a Bloomberg report, it says that the new tax is perceived by analysts to be aimed at the ultra-rich who have bought houses under “opaque structures to avoid such levies” because it is intended to address a loophole where individuals purchase several homes under trusts that do not have a clear beneficial owner, say analysts from APAC Realty Ltd.’s ERA unit and Cushman & Wakefield Plc.
The loophole has so far allowed these purchases to be made without any other taxes.
Bloomberg quoted the head of research at ERA, Nicholas Mak, as saying, “The new rule is targeted at the wealthy.”
When Finance Minister Lawrence Wong announced the national budget for this year last February, he spoke about impending changes in taxes, which mainly would affect the wealthiest.
He said that from 2024 onward, personal income tax rates will be increased.
“The portion of chargeable income in excess of $500,000 up to $1 million will be taxed at 23%, while that in excess of $1 million will be taxed at 24%; both up from 22% today,” the Minister said, noting that the increase is expected to impact the top 1.2 per cent of personal income taxpayers and will add $170 million in additional taxes per year.
Property taxes, which Mr Wong mentioned are currently the principal means of taxing wealth, will also increase the 10 to 20 per cent to 12 to 36 per cent. As for owner-occupied residential properties, the current rate of 4 to 16 per cent will be raised to 6 to 32 per cent.
These increases, however, will be implemented in two steps beginning next year.
Luxury cars will also be taxed at a higher rate. /TISG