Stamp Duty Basics for Property-Holding Entities

Additional Conveyance Duties (ACD) applies if you are buying or selling equity interests (e.g. shares or units)  in property-holding entities (PHEs) that own primarily residential properties in Singapore. The ACD provision applies to the purchase or sale of equity interests by persons or entities who are significant owners of the PHE or who become one after the purchase.

Overview of the Additional Conveyance Duties (ACD) Provision

 

ACD flowchart

 

1. What is a Qualifying Acquisition/ Disposal? 

A qualifying acquisition happens when equity interest in a PHE (i.e. the target entity) is acquired and the buyer (with any associates): 

  • is already a significant owner of the PHE before the acquisition; or
  • becomes a significant owner of the PHE after the acquisition.

Each qualifying acquisition is subject to ACDB. It does not apply to equity interest acquired before 11 Mar 2017. 

A qualifying disposal happens when the seller (together with any associates) is a significant owner of the PHE and the equity interest of the PHE disposed of:  

  • was acquired on or after 11 Mar 2017; and
  • disposed of within 3 years of acquisition (holding period) on a first-in-first out basis. 

2. What is a Property-Holding Entity (PHE)?

A PHE is an entity which has at least 50% (i.e. asset ratio) of its total tangible assets comprising prescribed immovable properties ("PIP") in Singapore. A PHE can be a Type 1 PHE, a Type 2 PHE or both. 

PIP means any immovable property that is –

  1. zoned or situated on land that is zoned “Residential”, “Commercial and Residential”, “Residential/Institution”, “Residential with Commercial at 1st Storey”, or “White”;
  2. permitted to be used by a written permission given under section 14(4) of the Planning Act (not being one that is given for a period of 10 years or less) or notification given under section 21(6) of the Planning Act for solely residential purposes or for mixed purposes one of which is residential; or
  3. used for solely residential purposes or for mixed purposes one of which is residential, in a case where the property was so used on 1 Feb 1960 and has not been put to any other use since that date, and where such use is not the subject of a written permission or notification mentioned in paragraph (b).

Type 1 PHE means the target entity has PIP of which the market value makes up at least 50% of the value of the entity's total tangible assets ("TTA").

Type 2 PHE means the target entity:

  • has 50% or more beneficial interest (directly or indirectly) in one or more entities each of which is a Type 1 PHE (henceforth referred to as “related entities”); and
  • the sum of the market value of the PIP beneficially owned by the target entity directly and indirectly through its related entities is at least 50% of the TTA of the target entity and all the entities which the target entity has 50% or more beneficial interest (directly/ indirectly) in.

3. Who is a Significant Owner of a PHE?

A significant owner of a PHE refers to a person or entity who beneficially owns at least 50% equity interest or voting power (“significant ownership threshold”) in a PHE either on its own or with its associates. 

In determining whether the 50% ownership threshold for significant ownership is met, the equity interest of the buyer’s and seller’s associates will be taken into account. In certain scenarios, the associates’ equity interests will also be included in the tax computation.

4. Who are Associates?

Where the buyer/seller is an individual, his/her associates include:

  1. family members such as grandparent, parent, child, grandchild, sibling and spouse, 
  2. partners in a partnership, limited partnership or limited liability partnership, or
  3. the entities which the buyer/seller beneficially owns 75% or more voting capital and more than 50% voting power in.

Where the buyer/seller is an entity, its associates include:

  1. subsidiaries which it beneficially owns 75% or more voting capital and more than 50% voting power in,
  2. individuals who or holding entities which beneficially owns 75% or more voting capital and more than 50% voting power in it
  3. other entities in the group that is an associated entity to a common holding entity or individual which meets condition ii.
  4. partners in a partnership, limited partnership or limited liability partnership 

Associates also include parties with an agreement or arrangement (whether oral/written/expressed/implied) to act together to acquire, hold or dispose of equity interest in, or with respect to the exercise of their votes in relation to the target entity. 

 

5. What are the Additional Conveyance Duties?

In addition to existing stamp duty on shares, the Additional Conveyance Duties (ACD) that will apply on qualifying sale/ transfer of equity interests in PHEs are:

  1. Additional Conveyance Duties for Buyers (ACDB):
    1. Existing Buyer’s Stamp Duty at 1% to 4%
    2. Additional Buyer’s Stamp Duty at 15% (flat rate)
  2. Additional Conveyance Duties for Sellers (ACDS):
    1. Seller’s Stamp Duty at 12% (flat rate)

ACD will be levied on the prevailing market value of the PHE’s underlying residential property at the time of the qualifying equity sale/ transfer, pro-rated by the percentage of the beneficial interest transferred in the PHE.

The value of the underlying residential property is dependent on the component of the PIP deemed attributable for residential purposes.

  1. If the PIP owned by the PHE (directly/indirectly) is a vacant land or an entire building with land:

    Zoning of the land  Component deemed as residential
    Residential100% of the gross floor area ("GFA")    
    Residential/ Institution
    White
    Commercial & Residential60% of the GFA
    Residential with commercial at first storeyTotal GFA less the minimum GFA which must be set aside for commercial uses under the Master Plan.
  2. If the PIP owned by the PHE (directly/indirectly) is a part of an entire building, the component of the property deemed residential is the part of the property permitted* for residential use.

The market value of the residential component may be determined by a professional valuer.


*Permitted use means: -
(a) A use permitted by a Written Permission given under section 14(4) of Planning Act other than that given for a period of 10 years or less i.e. exclude temporary permission granted by the Competent Authorities for change of use;
(b) A use authorized by a notification under section 21(6) of Planning Act; or
(c) Such use, being an existing use of the building or part thereof and not being the subject of a written permission given under section 14 of the Planning Act or a notification under section 21(6) of that Act, was a use to which the building or part thereof was put on 1st February 1960, and the building or part thereof has not been put to any other use since that date.

For more information and examples, please refer to IRAS e-Tax Guide on Stamp Duty: Additional Conveyance Duties (ACD) On Residential Property-Holding Entities.

 

Dutiable Documents relating to Property-Holding Entities

Dutiable documents relating to the sale/ transfer of equity interest in Property-Holding Entities (PHEs) include the following:

  1. Contract or agreement for sale and purchase;

  2. Assignment or transfer;

  3. Gift;

  4. Settlement; and

  5. Declaration of trust 

No stamp duties including ACD will apply if the transfer of equity interest in a PHE is pursuant to a will or by way of assent.

Where there is no document executed for the transfer of scripless shares, Stamp Duty is not payable. However, if there is a contract/agreement but the shares transferred are scripless i.e. no subsequent share transfer document, the transferee can apply for share duty and ACD remission. 

Making a Submission to IRAS

For acquisition of equity interest in a company, share duty remains payable in addition to the ACD. You are required to stamp the instrument and pay the share duty via our e-Stamping website (https://estamping.iras.gov.sg).

In addition, you will have to make a submission to IRAS within 14 days of the date of execution of the instrument (if executed in Singapore) or 30 days of the receipt of the instrument in Singapore (if executed overseas) and provide the supporting documents below:

  1. A copy of the contract/agreement or transfer instrument
  2. Entire group structure (pre-acquisition and post-acquisition) which shows: 
    1.  The chain of relationship including the percentage of equity interest between: 
      1. The ultimate holding entities, the intermediate holding entities and the immediate holding entities of target entity
      2. The target entity and all its related entities
    2.  Indication on the group structure the target entity or the related entities (whichever applicable) which own PIP in Singapore
  3. Documents (e.g. ACRA business profiles) which support the percentage of equity interest between each entity in S/N 2(a).
  4. Listing of the PIP in S/N 2(b). The listing should include: 
    1. The entities’ names and the address/ land details of the PIP owned by each of them
    2. The value of the PIP and underlying residential properties, supported by the valuation reports
  5. Latest audited accounts of the target entity and all related entities
  6. Register of the target entity which reflects the number of equity interests owned, date of acquisition/ disposal by each holder of the equity interests
  7. Articles of association of the target entity or other documentary evidences to support the voting power of each equity interest of the target entity
  8. Declaration of associates (individuals and/ or entities) and their beneficial equity interest in the PHEs (Please use the template in Annex G)
  9. Declaration by the buyer/seller that relevant checks have been made and the information provided is true.

The Commissioner of Stamp Duties may request for further information.

It is the responsibility of the party liable to provide the required information to IRAS.

If you are a buyer, you should approach the seller for information in S/N 2, 4, 5, 6 and 7, and verify with each of your associate on the percentage of equity interests it owns in the target entity. The seller and associate are legally obliged to furnish the requested information to you.

If you are the seller, you should approach your associate to verify the percentage of equity interests it owns in the target entity. Similarly, the associate is legally obliged to furnish the requested information to you.  

Arrangements chargeable with ACD

Section 23C of the Stamp Duties Act provides that certain arrangements# would be chargeable with ACD if they have the effect of:

  1. Changing in the amount of equity interest^ in a PHE, which would have otherwise resulted in ACD; or
  2. Resulting in an entity ceasing to be a PHE (e.g. a change in the composition of the tangible assets of an entity) and that arrangement takes place within 1 year of the execution of the instrument which would otherwise been chargeable.

For the purpose of paragraph (a), the Commissioner of Stamp Duties is satisfied that an issuance of equity interest for capitalisation purposes is not subject to ACD if there are no changes in the persons holding the equity interest and the respective holdings of equity interest, before and after the issuance. There is no need to seek the Commissioner’s opinion for such scenarios.


# Whether or not there are any instruments relating to the arrangement. In the absence of such instruments, the buyer/seller is required to give to the Commissioner of Stamp Duties a notice of the arrangement using this form.


^ Examples of such arrangement are an acquisition or issuance by an entity of its equity interests; and a cancellation, redemption or conversion of equity interest.

  • There are possible unforeseen consequences on business transactions – for example, fund managers are not speculators of residential property and the ACD on share transfers will also affect estate planning.

    The ACD is not a property market tightening measure. It is intended to address the stamp duty rate differential between the direct buying/ selling of residential property and the buying/selling of equity interest in entities holding primarily residential properties.

     

    On estate transfers, no stamp duties including ACD will apply if the transfer of equity interest in a PHE is pursuant to a will or by way of assent.

     

  • What if entities undertake joint venture (JV)agreements for property development? For example, when a company acquires the land first via a special purpose vehicle (SPV) before bringing in a JV partner, is the sale of a 50% equity interest in that SPV (assuming it is a PHE) to the JV partner subject to ACD? Would the JV partner be able to obtain remission since it is developing residential properties through the SPV?

    The transfer of 50% equity interest in the PHE to the incoming JV partner will attract both ACDB and ACDS if it satisfies the qualifying conditions.

    Parties who jointly own the SPV before acquiring the land through the SPV will not incur ACD.

    The SPV will enjoy the ABSD housing developers remission on the residential land acquired by it, if the residential development project fulfils the ABSD remission conditions.

     

  • Where there is a mortgage of equity interest in a PHE and the mortgagee (lender) exercises the power of sale upon default, will the mortgagor be subject to ACDS?

    If the equity interest disposed of was acquired on or after 11 Mar 2017 and within 3 years of purchase and the mortgagor was ever a significant owner, the mortgagor will be liable for ACDS arising from the sale by the mortgagee.

  • How will the residential component for White sites be determined?

    The definition of residential property follows from the ABSD policy. 

     

    Where a land is zoned ‘White’ under the Master Plan, 100% of the gross floor area will be deemed attributable to residential purpose.

  • Are contracts or agreements for sale of stocks and shares dutiable if ACD is liable?

    Yes, stamp duties will be payable on the contract/ agreement for the sale of stocks and shares or the share transfer document, whichever is earlier. However, if there is a contract/ agreement but the shares transferred are scrip-less, the share duty and ACD will be remitted under rule 3 of the Stamp Duties (Agreements for Sale of Equity Interests) (Remission) Rules (“remission rules”). There is no need to e-stamp or submit an application for remission to IRAS for contract/ agreement which satisfies rule 3 of the remission rules.

     

    The relevant duties remain payable on the executed transfer instrument, if applicable.


    For more information on the remission, please refer to remission for agreements for sale of equity interests

     

  • I am acquiring/disposing of equity interest in an entity. The entity owns (directly/indirectly) land zoned non-residential but contains residential units. Will the land be treated as a prescribed immovable property?

    As the non-residential land contains residential units, it is a prescribed immovable property for ACD purposes.

     

  • I am acquiring/disposing of equity interest in an entity. The entity (directly/indirectly) owns residential sites with serviced apartments (SA) development. Is the site considered as a prescribed immovable property?

    As the site owned by the entity is zoned residential, the site is a prescribed immovable property for ACD purposes.

     

  • I am acquiring/disposing of equity interest in an entity. The entity (directly/indirectly) owns sites zoned ‘White’ but the development is a non-residential or mixed-residential in nature. Is the site considered a prescribed immovable property?

    As the site owned by the entity is zoned “White”, it would be treated as a prescribed immovable property for the purposes of ACD.

     

  • Is ACD payable on issuance of new shares for capitalisation purposes where there are no changes in the shareholders and the shareholding proportion?

    An issuance of equity interest is subject to ACD under section 23C(1). However, the Commissioner of Stamp Duties is satisfied that an issuance of equity interest for capitalisation purposes is not subject to ACD if there are no changes in the persons holding the equity interest and the respective holdings of equity interest, before and after the issuance. There is no need to seek the Commissioner’s opinion for such scenarios.

  • I executed a Sale and Purchase Agreement (“SPA”) to acquire the equity interest of a PHE. The share duty and ACD have been paid. The seller and I decided to abort the sale, can I apply for refund of the share duty and ACD paid?

    You can apply for share duty and ACD remission within 6 months from the date of the rescission of the SPA. If you satisfy rule 4 of the Stamp Duties (Agreements for Sale of Equity Interests) (Remission) Rules, refund in excess of $50 for each duty type will be made to the party who is liable for stamp duty.


    For more information on the remission, please refer to remission for agreements for sale of equity interests

  • I executed a Sale and Purchase Agreement (“SPA”) to acquire the shares of a company which is not a PHE i.e. no ACD payable. Do I pay the share duty on the SPA or the subsequent transfer document?

    The share duty chargeable on the SPA is remitted under rule 2 of the Stamp Duties (Agreements for Sale of Equity Interests) (Remission) Rules (“remission rules”) if the SPA is not subject to ACD. There is no need to e-stamp or submit an application for remission to IRAS for contract/ agreement which satisfies rule 2 of the remission rules.


    The relevant duties remain payable on the executed transfer instrument, if applicable.


    For more information on the remission, please refer to remission for agreements for sale of equity interests

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