SINGAPORE — The Inland Revenue Authority of Singapore (IRAS) has announced that it will reward whistle-blowers with up to S$100,000 if they report private property buyers who are evading or reducing their Additional Buyer’s Stamp Duty (ABSD) using the “99-to-1” or similar arrangements.
The reward will be based on 15% of the tax recovered and capped at S$100,000 per case, and will be given to informants if the information and/or documents provided lead to tax recovery.
This move is part of IRAS’ efforts to combat tax avoidance and evasion, and it is not the first time the authority has offered a reward for information on such activities.
Private residential properties transacted between 2018 and 2021 saw about 0.5% involving “99-to-1” or similar purchase arrangements, as stated by Senior Minister of State for Finance Chee Hong Tat last Friday in response to questions by Members of Parliament on such arrangements.
The “99-to-1” arrangement allows buyers who already own property to avoid paying the full ABSD sum while still becoming the new property’s co-owner and co-applicant for bank loans to finance it.
The loophole enables them to reduce or avoid paying ABSD, which is a tax on residential property purchases, imposed by the Singaporean government as part of its property cooling measures.
IRAS is currently investigating private property purchases with such arrangements, and the audit will be done in phases, including transactions that took place after 2021.
However, IRAS has not specified whether decoupling arrangements, where a co-owner of a property transfers their share to another person, will be looked into.
Property curbs such as ABSD were introduced in December 2011, with an additional 3% levy imposed on Singaporeans’ third and subsequent property acquisitions.
Singaporeans now pay 17% ABSD on their second residential property and 25% on their third and subsequent homes. Foreigners now pay 30% ABSD for any property purchased.
Those who are aware of tax avoidance or tax evasion arrangements can write to IRAS at [email protected]
IRAS has stated that it will keep confidential the identities of informants and documents/information.
Taxpayers who wish to come forward voluntarily to disclose and make good any underpayment of taxes may do so, and IRAS will generally look at such cases more favourably.
In cases of tax avoidance, the Commissioner of Stamp Duties will disregard or vary any tax avoidance arrangement, recover the rightful amount of stamp duty, and impose a 50% surcharge on the additional duty payable.
IRAS also noted that further penalties of up to four times the outstanding amount may be imposed if the stamp duty and surcharge are not paid by the deadline.
In his reply, Mr Chee noted that there is no statutory time limit for stamp duty audits. This means the ongoing investigation could target all cases involving such deals since 2011, when the ABSD was introduced.
He also emphasized that the Singaporean government takes a serious view of individuals who promote or facilitate tax avoidance arrangements, in addition to the buyers.IRAS will refer those identified as such to the relevant regulatory agencies.
This was in response to a question by a Member of Parliament, who had asked whether lawyers will be held accountable for such arrangements as they have a duty to highlight such risks when drafting the agreements.
Mr Chee also stated that property agents who facilitate such arrangements will be referred to the Council for Estate Agencies for investigation and disciplinary action, and may face financial penalties and/or suspension of their registrations depending on the severity of the breach.