How Does ABSD in Singapore Affect Home Purchases for Permanent Residents (PR)

The Additional Buyer’s Stamp Duty (ABSD) in Singapore plays a significant role in shaping the real estate market and affects home purchases for Permanent Residents (PRs). This article explores the intricacies of ABSD for PRs, its impact on property transactions, and the specific considerations for PRs looking to buy residential properties in Singapore.

What is ABSD and How Does it Impact Property Purchase for PRs?

Understanding ABSD for PR in Singapore

ABSD is a tax imposed by the Inland Revenue Authority of Singapore (IRAS) on top of the standard Buyer’s Stamp Duty when purchasing residential properties. Introduced in 2011 and revised several times since, ABSD aims to cool the property market and ensure housing affordability. The ABSD rates vary based on the buyer’s residency status and the number of residential properties they own.

For Singapore Permanent Residents (SPR), the latest ABSD rates are as follows:

• First Residential Property: 5%
• Second Residential Property: 30%
• Third and Subsequent Residential Properties: 35%

These rates apply to the higher of the purchase price or the market value of the property.

Why Do Permanent Residents Need to Pay ABSD?

Permanent Residents in Singapore are subject to ABSD as part of the government’s efforts to maintain a balanced and sustainable property market. The policy aims to prioritize housing for Singapore citizens while still allowing PRs to invest in the local property market. PRs need to pay ABSD on their first and subsequent residential property purchases, with rates higher than those for Singapore citizens but lower than for foreigners buying any residential property in Singapore.

The rationale behind imposing ABSD on PRs is to encourage them to make careful considerations before investing in multiple properties. This approach helps prevent excessive speculation in the property market and ensures that PRs contribute to the overall stability of Singapore’s real estate sector. By implementing differentiated ABSD rates, the government aims to strike a balance between allowing PRs to participate in the property market and safeguarding the interests of Singapore citizens in terms of housing affordability and accessibility.

How Does ABSD Affect Home Purchases for a Permanent Resident (PR)?

ABSD significantly affects home purchases for Permanent Residents in Singapore by increasing the overall cost of acquiring residential properties. When buying their first residential property, PRs must factor in the additional ABSD on top of the property price and other associated costs. This higher upfront cost can impact affordability and may influence decision-making processes when considering property investments. The ABSD rate for PRs buying their first property is currently set at 5% of the purchase price or market value, whichever is higher.

For PRs considering buying a second or subsequent residential property, the ABSD rate increases substantially, making such purchases more financially challenging. The higher ABSD rates for additional properties aim to discourage excessive property investment and speculation. As a result, PRs must carefully evaluate their financial capabilities and long-term objectives when contemplating multiple property purchases. The impact of ABSD on home purchases extends beyond just the financial aspect, as it also influences market dynamics, property choices, and investment strategies for PRs in Singapore’s real estate landscape.

Key Points About ABSD for SPRs

• Joint Purchases: If an SPR purchases a property jointly with someone of a different profile (e.g., a Singapore Citizen or a foreigner), the highest applicable ABSD rate will apply to the entire value of the property.
• Purpose of ABSD: The ABSD is designed to curb speculative buying, which can drive up property prices. By imposing higher taxes on those purchasing multiple properties or non-residents, the government aims to maintain a stable and affordable property market.
• Exemptions and Remissions: Certain exemptions and remissions are available. For example, married couples where one spouse is a Singapore Citizen and the other is an SPR can apply for ABSD remission on their first property purchase.

The ABSD policy has been instrumental in regulating property prices and preventing speculative buying. It applies to various types of residential properties, including private condominiums, landed houses, and even HDB flats in certain circumstances. The implementation of ABSD has led to a more stable property market, benefiting both Singapore citizens and permanent residents by maintaining reasonable property prices and ensuring sustainable growth in the real estate sector.

How is the ABSD Rate for PRs Determined?

The ABSD rate is determined based on several factors, primarily the buyer’s residency status and the number of residential properties owned in Singapore. For Permanent Residents (PRs), the government has established a tiered system where the ABSD rate increases with each additional property purchase. The Inland Revenue Authority of Singapore (IRAS) is responsible for setting and enforcing these rates, which are designed to regulate the property market and ensure housing affordability for Singapore citizens.

When calculating the ABSD payable, the rate is applied to either the purchase price of the property or its market value, whichever is higher. This approach ensures that the ABSD accurately reflects the true value of the property transaction. The determination of ABSD rates also takes into account broader economic factors and property market trends. By adjusting these rates periodically, the government can respond to changing market conditions and maintain a balance between allowing property investment and preventing excessive speculation in Singapore’s real estate market.

Can Married Couples who are PR Get ABSD Remission?

Eligibility Criteria for ABSD Remission for Married Couples

Married couples in Singapore may be eligible for ABSD remission under certain conditions. To qualify for the ABSD remission, at least one spouse must be a Singapore citizen. The couple must not own any other residential property at the time of purchase and must buy the property jointly. Additionally, they must sell any existing residential property within six months of purchasing the new property if they owned one previously. This remission is designed to support families in owning their homes and applies to the purchase of a single residential property.

It’s important to note that the ABSD remission for married couples is not automatic and must be applied for. The eligibility criteria are strict, and both spouses must meet all requirements to be considered. For Permanent Residents married to Singapore citizens, this remission can provide significant financial relief, as it potentially allows them to avoid paying the ABSD on their joint property purchase. However, if the PR spouse owns any other residential property, the couple would not be eligible for the remission, highlighting the importance of careful property planning for mixed-nationality couples.

How to Apply for ABSD Remission?

To apply for ABSD remission, eligible married couples must follow a specific procedure set by the Inland Revenue Authority of Singapore (IRAS). The application process typically begins with paying the ABSD upfront at the time of property purchase. Within six months of the purchase date or the issue date of the Temporary Occupation Permit or Certificate of Statutory Completion (whichever is earlier), the couple must submit their application for remission to IRAS. This application should include all necessary supporting documents to prove their eligibility.

The application for ABSD remission requires careful attention to detail and timely submission. Couples need to provide documentation such as their marriage certificate, proof of citizenship or permanent residency, and details of the property transaction. If the couple previously owned another property, they must also provide evidence of its sale within the stipulated timeframe. IRAS reviews each application carefully, and if approved, the ABSD paid will be refunded. For Couples with one permanent resident spouse married to a Singapore citizen, must take into consideration that not meeting any conditions or deadlines can lead to their remission application being rejected, highlighting the need for careful preparation and prompt action.

Recent Changes

The ABSD rates have been revised several times to address market conditions. The most recent change took effect on April 27, 2023, reflecting an increase in rates, particularly for SPRs buying their second and subsequent properties. Understanding these changes is essential for SPRs considering investments in Singapore’s real estate sector. The Additional Buyer’s Stamp Duty (ABSD) has a substantial effect on the expenses associated with property transactions and can sway investment choices.

If you are a Singapore PR looking to purchase your next, new or 2nd residential property, it is highly recommended to contact me to schedule a meeting to discuss your options and how to navigate the ABSD. As the right real estate agent with the necessary experience, I can provide expert guidance on minimizing the ABSD impact, explore available exemptions or remissions you may qualify for, and help develop an optimal property investment strategy tailored to your needs and goals as a PR in Singapore’s dynamic real estate landscape. Get in touch with Jack Tan today!