Speeches

Second Reading Speech by Chee Hong Tat Senior Minister of State for Finance on the Stamp Duties (Amendment) Bill 2022

05 Jul 2022

Madam Deputy Speaker, on behalf of the Deputy Prime Minister and Minister for Finance, I beg to move, "That the Bill be now read a second time."
The Stamp Duties (Amendment) Bill 2022:
- introduces the Additional Conveyance Duties for Trust, or ACD (Trust); and
- imposes stamp duty in relation to the renunciation of interest by a beneficial owner in residential property that is held on a trust.
If passed by Parliament, the amendments in the Bill will take effect on 10 May 2022, that is, one day after the First Reading of the Bill. As the Bill amendments are market sensitive, this approach brings the Bill into effect the day after its introduction.

Rationale for Changes
Before I go through the key amendments in the Bill, let me explain the rationale for the changes.
Today, residential properties can be acquired directly, or via equity interests, including unlisted shares, in property holding entities, or PHEs. These refer to entities whose primary tangible assets are residential properties in Singapore.
- Direct acquisitions of residential property are subject to Buyer’s Stamp Duty, or BSD, and where applicable, Additional Buyer’s Stamp Duty or ABSD.
- Acquisitions of unlisted shares in PHEs are subject to share duty of 0.2%, based on the purchase price or the value of the shares.
- Such acquisitions may also be subject to ACD, if the acquirer is a significant owner of the PHE, or becomes one after the acquisition.
- A significant owner is a person who beneficially owns at least 50% of the equity interests or voting power in the PHE.
- ACD was introduced in 2017 to address the stamp duty rate differential that previously existed between the direct acquisition or disposal of residential properties; and the acquisition or disposal of equity interests in PHEs.
- ABSD and ACD thus operate together to promote a stable and sustainable residential property market in Singapore.
Madam, previously, when residential property was transferred into a living trust with no identifiable beneficial owner of the property at the time of transfer, ABSD did not apply.
As trusts are complex instruments and serve diverse purposes, the Government carefully studied the issue, before deciding on how transfers of residential property into trusts would be treated. We then introduced Additional Buyer’s Stamp Duty for Trust, or ABSD (Trust), on 8 May, which took effect on 9 May 2022.
ACD (Trust) follows from the introduction of ABSD (Trust). With ACD (Trust), ACD may apply when equity interests in a PHE are transferred into a living trust, regardless of whether there is an identifiable beneficial owner of those interests at the time of transfer.
These changes ensure similar stamp duty treatment for transfers of residential property or equity interests in a PHE, whether acquired directly or through a trust.
If an Institution of a Public Character or IPC is the sole beneficial owner of the residential property or equity interests in a PHE transferred into the trust, among other conditions, the IPC can apply for a remission of ABSD (Trust) or ACD (Trust). Today, donations of immovable property or unlisted shares to IPCs qualify for stamp duty remission.

ACD (Trust)
Let me elaborate on ACD (Trust), which is primarily provided for under clause 5 of the Bill.
To determine whether ACD (Trust) applies, to the acquisition of equity interests in a PHE that are to be held on a trust for beneficiaries who are not identifiable beneficial owners, we will consider the equity interests in the PHE that are to be held by the trustee of the trust for those beneficiaries.
- This consideration is only of the portion of interests to be held on trust for those beneficiaries.
- For example, if the trustee is to hold 10% equity interests in a PHE for identifiable beneficial owners, and another 5% for other beneficiaries who are not identifiable beneficial owners, only the 5% equity interests will be considered to be held by the trustee for the purpose of determining whether ACD (Trust) applies.
ACD (Trust) will apply in such a case only if the trustee is a significant owner with at least 50% equity interests or voting power in the PHE, or becomes one after the acquisition.
In determining the trustee’s significant ownership status, the equity interests that are beneficially owned by the trustee’s associates will be treated as beneficially owned by the trustee.
A treatment for associates already exists in the ACD regime to cover arrangements under which individual buyers act in concert to purchase equity interests, with the objective of avoiding ACD.
Examples of associates include parents, children, spouses, and associated companies. In assessing whether an identifiable beneficial owner of equity interests in a PHE is a significant owner of the PHE, the interests beneficially owned by the beneficial owner and the beneficial owner’s associates will be considered.
In the instance where a trustee holds equity interests for a beneficiary who is not an identifiable beneficial owner of those interests at the time of their transfer into the trust, such a beneficiary is considered an associate of the trustee in determining whether the trustee is a significant owner of the PHE. This definition of associates will be provided for in subsidiary legislation.
If ACD (Trust) applies, the trustee will be liable to pay ACD (Trust) at the prevailing ACD rates of up to 44% for buyers, comprising 40% ABSD and up to 4% BSD.
ACD (Trust) may also apply if the trustee, being a significant owner of a PHE, disposes of the trustee’s equity interest that were held on trust for a beneficiary who is not an identifiable beneficial owner. If the trustee disposes of the equity interest within three years after acquiring them, the trustee will be liable to pay ACD at the prevailing ACD rate of 12% for sellers, equivalent to the highest Seller’s Stamp Duty, or SSD, rate.

Conveyance of Equity Interests to Trust Beneficiary
In addition, where the trustee transfers equity interests to a beneficiary of the trust who was not an identifiable beneficial owner of those interests at the time they were transferred into the trust, the beneficiary will be liable to pay the prevailing ACD for buyers if the beneficiary is a significant owner, or becomes one after the transfer. Clause 3 of the Bill provides for this.

Renunciation of Interest in Residential Property Held on Trust
Next, clause 4 of the Bill introduces a new section 22C which imposes a statutory duty on the original beneficial owner of a trust residential property who renounces his or her interest in the property, such that this interest reverts to the settlor of the trust. The original beneficial owner is one who beneficially owns the property at the time it is transferred into the trust.
- The original beneficial owner must give a written notice of the renunciation to the settlor and to the Commissioner of Stamp Duties within a specified period.
- If he or she fails to do so, and the Commissioner becomes aware of this, for example through IRAS’ regular audit, the Commissioner may give the notice to the original beneficial owner and the settlor instead.
- For his or her failure to give notice, the original beneficial owner will be liable on conviction to a fine not exceeding $1,000.
The notice, whether given by the original beneficial owner or the Commissioner, will be chargeable with stamp duty.
- Specifically, the settlor will be liable to pay BSD and where applicable, ABSD.
- If the interest in the trust residential property is renounced within three years after the original beneficial owner first has beneficial ownership of the interest, the original beneficial owner will also be liable to pay SSD.
- For any duty paid late or not paid, the original beneficial owner or the settlor will have to pay a penalty of up to four times the duty payable, which is the penalty under the current Stamp Duties Act.
This treatment for the renunciation of interest by an original beneficial owner, will ensure that where the beneficial ownership of a trust residential property reverts to the settlor, the settlor would have to pay stamp duty; similar to if he or she had acquired the property directly.

Transitional Provisions
Clauses 8 and 9 make transitional provisions to modify the application of the Bill to matters occurring between 10 May and the date the Amending Act is published in the Gazette.
On that, Madam Deputy Speaker, I beg to move.