Since 2011, the Additional Buyer’s Stamp Duty, or ABSD, was introduced as one of the property market cooling measures to cool down the hot Singapore property market. The ABSD is only applicable to residential properties.
| Additional Buyer’s Stamp Duty (ABSD) Rates on or after 27 April 2023 | |||
| Buyer Profile | First Residential Property | Second Residential Property | Third and Subsequent Residential Property |
| Singapore Citizens | 0% | 20% | 30% |
| Singapore Permanent Residents (PR) | 5% | 30% | 35% |
| Foreigners | 60% | 60% | 60% |
| Entities (includes an additional 5% for housing developers) (non-remittable) | 65% | 65% | 65% |
Other cooling measures include the Seller’s Stamp Duty (SSD), changes to the Loan-to-Value ratio, and more. To promote prudent lending practices, the government introduced the Total Debt Servicing Ratio (TDSR) framework in 2013.
When property owners or investors want to purchase their next property, they must be mindful of the Additional Buyer’s Stamp Duty. This article will explore the potential impact of ABSD on inherited properties.
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Case Study: Does a beneficiary with an existing property need to pay ABSD when inheriting another property?
In the case of direct inheritance, regardless of whether there is a will, both Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD) are not applicable.
Mr. Cheng is a widower with three children, and each child already owns a residential property. He passes away without a will, and his property is to be inherited equally by his children. In this situation, no Buyer’s Stamp Duty or Additional Buyer’s Stamp Duty will be incurred, and the children can inherit the property.
Now, each child owns two properties, with the second inherited property being co-owned by the three of them. When they purchase a new residential property, the Additional Buyer’s Stamp Duty will be calculated based on it being their third property.
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However, if two of the children wish to sell their shares of the inherited property to their eldest brother, he would need to pay ABSD to purchase these shares since he already owns a property.
This situation may not be ideal due to the additional taxes payable. Mr. Cheng could have saved his children the hassle and cost by planning his estate inheritance.
For example, Mr. Cheng could have assessed his children’s financial needs and bequeathed the property to the child who needed it most. He could then bequeath cash of equivalent value to the other two children. He could also have created an estate through insurance.
This would ensure that Mr. Cheng’s children could inherit his estate without incurring any tax issues. Alternatively, he could have instructed the executor of the estate to sell the property and distribute the proceeds accordingly. However, this approach might not be suitable if Mr. Cheng wanted to pass the property down through generations. Other factors, such as Seller’s Stamp Duty (SSD) and the Total Debt Servicing Ratio (TDSR), must also be considered.
Given Singapore’s high rate of property ownership, it is very important for owners to strategize their estate inheritance to ensure that beneficiaries can inherit the estate smoothly without incurring any additional costs in the process.
Official Sources & References
- IRAS — Additional Buyer’s Stamp Duty (ABSD) rates: ABSD official page
- IRAS — Buyer’s Stamp Duty (BSD): BSD official page
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