Stamp Duty Basics for Property-Holding Entities

Additional Conveyance Duties (ACD) applies if you are buying or selling shares or units ("equity interests") 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 a property-holding entity whose primary tangible assets (owned directly/indirectly) are Singapore residential properties. A PHE can be a Type 1 PHE, a Type 2 PHE or both. 

Type 1 PHE means the target entity whose market value of the residential properties makes up at least 50% of the value of its total tangible assets (TTA).

Type 2 PHE means the target entity:

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

Click here for the Definition of Residential Property

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 in a PHE either on its own or with its associates. 

4. Who are 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.

Example of 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 

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 transfer of equity interests in PHEs are:

  1. Additional Conveyance Duties for Buyers (ACDB):
    1. Existing Buyer’s Stamp Duty at 1% to 3%
    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 Type 1 PHE’s underlying residential property at the time of the qualifying equity transfer, pro-rated by the percentage of the beneficial equity interest transferred in the Type 1 PHE.

For more information on examples and computation, 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 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.

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 the stipulated stamping timeframe on the qualifying acquisition/disposal 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 residential properties 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 residential properties in S/N 2(b). The listing should include: 
    1. The entities’ names and the address/land details of the residential properties owned by each of them
    2. The value of the residential properties
  5. Valuation reports of the residential properties that indicate the prevailing market value
  6. Latest audited accounts of the target entity and all related entities
  7. Register of the target entity which reflects the number of shares/units owned, date of acquisition/disposal by each shareholder/unitholder
  8. Articles of association of the target entity or other documentary evidences to support the voting power of each equity interest of the target entity
  9. Declaration of associates (individuals and/or entities) and their beneficial equity interest in PHEs (Please use the template in Annex 6)
  10. 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.  

When to Stamp

You are required to stamp a document before you sign it. However, if you have signed a document and stamped it within the following time frame, no penalty will be charged: 

  1. Within 14 days after signing the document if it is signed in Singapore or
  2. Within 30 days after receiving the document in Singapore if the document is signed overseas

Where to Stamp

You can stamp your documents easily through any of the following:

Non-Payment or Late Payment of Stamp Duty

If you do not meet the deadline, you may have to pay a penalty.

A penalty of up to 4 times may be imposed on documents that are unstamped, stamped late or insufficiently stamped.

It is an offence to use a document for which Stamp Duty payment has not been made. 

Please refer to Late Payment of Stamp Duty for more details.

 

  • 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 JV partner will enjoy the ABSD housing developers remission on the residential land acquired by the SPV, 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?

    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 i.e. there is no subsequent share transfer document, the transferee can apply for share duty and ACD remission.

     

  • 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 non-residential or residential?

    Definition of residential property for ACD purposes is aligned to the ABSD treatment. 

    • For ownership of vacant land/entire building with land, the property is considered a residential property if the land is zoned ‘Residential’, ‘Residential/Institution’, ‘White’, ‘Commercial & Residential’ and ‘Residential with commercial at 1st storey’.
    • For ownership of building units (without interest in land), the property is considered as residential property if the property is permitted for residential use. 

    Thus, the land will be treated as a non-residential 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 residential property?

    As the site owned by the entity is zoned residential, the site is a residential 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.

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

     

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