Uncertainty Over New Rules On Property
THERE is confusion in property circles concerning the application of the new stamp duty to certain types of real estate.
The major grey area centers on whether commercial units like shops or offices constructed within residential developments on residential-zoned land will be covered by the additional buyer’s stamp duty (ABSD) and seller’s stamp duty (SSD).
Industry players explain that there is ambiguity on what really defines a ‘residential property’ that would incur the duties: Will it be based on the approved use of the units or the zoning of the land under the Urban Redevelopment Authority’s (URA) master plan?
They add that queries to the Inland Revenue Authority of Singapore (Iras) have produced varying replies, particularly on the subject of units in mixed-use land zoning.
There also appears to be complexity pinning down precisely how the ABSD will be applied considering that the present e-tax guide is vague on this area.
An Iras spokesman said that ‘in general, properties approved for commercial use on residential land should not be subject to the ABSD or SSD’.
However, there are exceptions. This would include Singapore property that was accorded provisional approval for commercial use by the URA such as a residential shop house being given temporary approval as an office or shop space. In similar cases, the seller’s stamp duty of up to 16 per cent is applicable.
Nevertheless commercial units in condominiums – minimarts, for example, or salons – on the ground floor of certain blocks that have acquired long-term approval for such use are not likely to be slapped with any of the stamp duties.
The Iras spokesman further added: ‘When the use of the property is not residential on a land zoned residential, we will need to examine the facts of the case to determine if the property is residential property within the scope of ABSD and SSD.’
The taxman did not explain further on what precisely these criteria are.
While there are most likely a small number of commercial units that will be subject to the extra stamp duties, experts say the ambiguity only added more questions within the industry as to what exactly the ABSD applies to.
Mr Lee Liat Yeang, a partner at Rodyk & Davidson’s Real Estate Practice Group, said Iras should formulate a clearer definition of ‘residential property’ for the application of ABSD.
The ABSD should be applied in accordance to the approved use specified by URA rather than the zoning of the land under the URA master plan, he said.
‘According to the e-tax guide, Iras appears to be looking at the masterplan zoning in order to establish whether the approved use is residential in whole or in part.
‘But the master plan shows only the general parameters of possible uses for the land upon which URA will then approve specific use for properties,’ he added.
Mr Lee cited the fact that there are full commercial-zoned lands sites such as Eon@Shenton that have acquired URA approval for residential, office and retail uses.
There are also approved commercial units built on land zoned fully or partially residential under the master plan.
‘Iras should speedily tackle this definition issue of residential property in order for the public and lawyers to distinguish whether ABSD is payable in the purchase of specific property which has approved use different from the zoning,’ he added.