Current News by EPPL- Avoidance Of ABSD And Purchases Under Trusts

Avoidance of ABSD and Purchases under Trusts

Readers might have recently come across the Straits Time article titled “Property agents, buyers jailed for evading $69,000 in stamp duty by backdating option to purchase” published on 24 Sep 2021 by Wong Shiying. 

The prosecution of the various parties is a warning to any person who attempts to use fraudulent documents  to avoid paying ABSD (Additional Buyer’s Stamp Duty). Apart from the jailable terms, the couple involved was ordered to pay a penalty of S$276,000, four times the amount of ABSD evaded.

In another Channel News Asia article, it said that if individuals were aware of such evasions, they could contact the Inland Revenue Authority of Singapore (IRAS), and a reward based on 15 per cent of the tax recovered, capped at S$100,000 would be given to informants in successful cases!\

A structure where ABSD is possibly also avoided relates to trusts which have been set up by many parents. Many appoint themselves as trustees; likely for their own convenience and without understanding the proper role, administration and responsibilities of trusteeship. Many of these trusts if scrutinized could be nominee arrangements instead, the motive largely being to avoid ABSD. Under the scrutiny and audit of the IRAS, many of these trusts could be deemed as tax avoidance schemes and the “parent trustee” possibly prosecuted and fined.

The current ABSD rules introduced as part of the property cooling measures do not penalize genuine trusts that are set up for inheritance and succession planning and where ABSD is not payable when the beneficiary concerned does not own any other residential property. For the longest time, the Trustees Act already gives powers to trustees to purchase residential property for the benefit of a beneficiary. The situations where such property trusts can be planned for and unaffected by the imposition of ABSD are numerous, such as for protection of beneficiaries who are minors, spendthrifts or even if adult are vulnerable because of the loss or potential loss of mental incapacity.

Those who are considering purchasing residential property and setting up a trust to hold the property where another person is beneficiary should seek proper legal and tax advice.


This article was first published in our newsletter, The Custodian Issue 19 on Oct, 2021. Click here to access our latest newsletter.

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