The Stamp Duties (Amendment) Bill (the “Bill”) was introduced in Parliament on 9 May 2022. The Bill introduced Additional Conveyance Duty (“ACD”) for (i) transfers of equity interests in Property Holding Entities (“PHEs”) into trusts for non-bare trust beneficiaries; and (ii) distribution of equity interests by trustee to non-bare trust beneficiaries. These changes will take effect on 10 May 2022.

What is the Duty that I need to pay as a Seller disposing of equity interests in Property-Holding Entities (PHEs)?

The Additional Conveyance Duties for Sellers (ACDS) will apply on qualifying disposal of equity interests in the PHE (“Target”) based on the market value of the underlying residential property.

Additional Conveyance Duties for Sellers (ACDS) Rates

(A) If the Target is a Type 1 PHE

Market value of the underlying residential property

own by the Target

ACDS
12% on the entire value12% x U1/V x W
(B) If the Target is a Type 2 PHE

Market value of the underlying residential property

own by the Target

ACDS
12% on the entire value

12% x U1/V x W1 x X

+

12% x U1/V x W2

 

Note: The above table is a simplified version. For the full version and the terms used, please refer to IRAS e-Tax Guide on Stamp Duty: Additional Conveyance Duties (ACD) On Residential Property-Holding Entities (PDF,819KB).

An illustration: How does ACDS work?

Direct sale/transfer of equity interests in PHE 

Mr W owns 80% equity interest in Company B which owns 90% equity interest in Company A. Company A directly owns a prescribed immovable property valued at $8M and it total tangible assets is $10M. Company B’s total tangible assets is $2M. Mr W had previously acquired 40% equity interest in Company B on 1 Jan 2011, 10% on 1 Apr 2017 and 30% on 1 Jan 2019.

Mr W sold his 80% equity interest in Company B on 1 Jan 2021 to his friend, Mr V.

STEP 1: Determine if the target is a PHE

Asset percentage for Company A = $8M/$10M = 80%

Company A is a Type 1 PHE as 80% of its total tangible assets is prescribed immovable property

Asset percentage for Company B = $8M x 90% / [$2M + ($10M x 90%)] = 65%

Company B is a Type 2 PHE.

STEP 2: Determine the seller’s associates
Mr W is not associated to the other equity-holders in Company B. We will only look at the 80% equity interest belonging to Mr W.

STEP 3: Determine if the seller is a significant owner

Mr W is a significant owner as he owns 80% in Company B, which is above the 50% significant ownership threshold.

STEP 4: Compute the ACDS payable

Assuming that the prescribed immovable property is a part of an entire building used for residential purposes and the value of it is $8M,

  • Mr W: ACDS x 30%* x $8M x 90%

*ACDS does not apply to the other 50% equity interest as 40% was acquired before 11 Mar 2017 and 10% was acquired more than 3 years ago from the date of sale.

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 (PDF, 819KB).

 

Sale of equity interest in trust by trustee

A. Where the beneficiary is a bare trust beneficiary

Mr Y is a trustee of Trust X, which holds 80% equity interest in Company D on trust for Mr Z who has beneficial ownership of the equity interest.

Company D owns 90% equity interest in Company C. Company C directly owns a prescribed immovable property valued at $8M and its total tangible assets is $10M. Company D’s total tangible assets is $2M. Trust X had previously acquired 40% equity interest in Company D on 1 Jan 2011 and 10% on 1 Apr 2017. It acquired a further 30% equity interest on 1 Jul 2022.

Mr Y, in his capacity as trustee of Trust X, sold the 80% equity interest in Company D on 31 Dec 2022.

 STEP 1: Determine if the target is a PHE

Asset percentage for Company C = $8M/$10M = 80%

Company C is a Type 1 PHE as 80% of its total tangible assets is prescribed immovable property

Asset percentage for Company D = $8M x 90% / [$2M + ($10M x 90%)] = 65%

Company D is a Type 2 PHE.

STEP 2: Determine the beneficial owner’s associates

Mr Z is not associated to the other equity-holders in Company D. We will only look at the 80% equity interest beneficially owned by Mr Z.

STEP 3: Determine if the beneficial owner is a significant owner

The beneficial owner, Mr Z, is a significant owner as he has beneficial ownership of 80% equity interests in Company D, which is above the 50% significant ownership threshold.

STEP 4: Compute the ACDS payable

Assuming that the prescribed immovable property is a part of an entire building used for residential purposes and the value of it is $8M,

  • Mr Z: ACDS x 30%* x $8M x 90%

 *ACDS does not apply to the other 50% equity interest as 40% was acquired before 11 Mar 2017 and 10% was acquired more than 3 years ago from the date of sale.

B. Where there is no beneficiary who is identifiable or who has beneficial ownership of the equity interests in the trust 

Mr J is a trustee of Trust T, which holds 80% equity interest in Company F on trust for Mr K and Mr L. As the trustee, Mr J has the discretion to decide whether Mr K and Mr L will receive any part of the equity interest, and in what proportion, i.e. Mr K and Mr L are non-bare trust beneficiaries.

Company F owns 90% equity interest in Company E. Company E directly owns a prescribed immovable property valued at $8M and its total tangible assets is $10M. Company F’s total tangible assets is $2M. Trust T had previously acquired 40% equity interest in Company F on 1 Jan 2011, 10% on 1 Apr 2017 and 30% on 1 Jul 2022. 

Mr J, in his capacity as trustee of Trust T, sold the 80% equity interest in Company F on 31 Dec 2022.

STEP 1: Determine if the target is a PHE 

Asset percentage for Company E = $8M/$10M = 80%

Company E is a Type 1 PHE as 80% of its total tangible assets is prescribed immovable property

Asset percentage for Company F = $8M x 90% / [$2M + ($10M x 90%)] = 65%

Company F is a Type 2 PHE. 

STEP 2: Determine the trustee’s associates

As there is no beneficial owner, the trustee (and his associates) will be looked to in determining if the significant owner threshold has been met.

The trustee’s associates are the non-bare trust beneficiaries, Mr K and Mr L. Both do not own any equity interest in Company F in their own name.

STEP 3: Determine if the trustee is a significant owner

The trustee is a significant owner as the trust owns 80% in Company F, which is above the 50% significant ownership threshold.

STEP 4: Compute the ACDS payable

Assuming that the prescribed immovable property is a part of an entire building used for residential purposes and the value of it is $8M,

  • Trustee (Mr J): ACDS x 30%* x $8M x 90%

*ACDS does not apply to the other 50% equity interest as 40% was acquired before 11 Mar 2017 and 10% was acquired more than 3 years ago from the date of sale.