In recent years, the Inland Revenue Authority of Singapore (IRAS) has been vigilant in its efforts to curb tax avoidance schemes in the property market. As of April 2024, IRAS has unearthed 166 cases of tax avoidance related to private property purchases, resulting in the potential recovery of around S$60 million in Additional Buyer’s Stamp Duty (ABSD) and surcharges. These revelations shed light on the prevalence of a particular scheme known as the "99-to-1" arrangement, which some property buyers have utilized to circumvent rightful tax obligations.

On May 7, Deputy Prime Minister and Minister for Finance Lawrence Wong addressed the issue, highlighting the "99-to-1" arrangement as a prime example of tax avoidance tactics employed by certain property buyers. This scheme involves buyers manipulating property transactions to reduce the ABSD payable on residential property purchases. Essentially, it entails a scenario where a buyer acquires a mere 1% stake in a property, allowing them to significantly decrease their tax liability.

Under this arrangement, the Commissioner of Stamp Duties has the authority to disregard individual transactions and treat them as a single joint purchase. Consequently, IRAS can then recover the appropriate amount of ABSD owed, coupled with a 50% surcharge. This stringent approach underscores Singapore’s commitment to maintaining the integrity of its tax system and ensuring fairness in property transactions.

The prevalence of such schemes is concerning, with approximately 0.5% of private residential properties transacted between 2018 and 2021 involving similar purchase arrangements. This trend has prompted authorities to take decisive action to stem the tide of tax evasion in the property sector. Senior Minister of State for Finance Chee Hong Tat emphasized the consequences for agents found complicit in facilitating these arrangements, including financial penalties and suspension of registrations.

One of the key indicators of potential tax avoidance is the swift sale of the 1% stake shortly after the initial purchase. By exploiting this loophole, buyers seek to minimize their tax liabilities, often at the expense of the integrity of the tax system. For instance, a buyer purchasing a property valued at S$1 million would ordinarily incur a 20% ABSD. However, by acquiring only a 1% stake in the property, they effectively reduce their ABSD obligation to a mere fraction of the actual amount owed.

To address these issues, IRAS remains vigilant in scrutinizing property transactions and identifying instances of tax avoidance. By leveraging data analytics and collaborating with relevant agencies such as the Council for Estate Agencies, IRAS aims to strengthen enforcement efforts and deter individuals from engaging in dubious practices.

Ultimately, the crackdown on tax avoidance in Singapore’s property market underscores the government’s commitment to upholding the integrity of its tax regime and fostering a level playing field for all stakeholders. As authorities continue to tighten regulations and enhance oversight, buyers and agents alike must adhere to the principles of transparency and compliance to ensure the sustainability and fairness of the property market ecosystem.