Confusion over new property rule

Source: Straits Times. Sat Apr 14

THERE is confusion in property circles about how the new stamp duty will be applied to certain types of real estate.

The biggest grey area centres on whether commercial units such as shops or offices built within residential developments on residential-zoned land will be subject to the additional buyer's stamp duty (ABSD) and seller's stamp duty (SSD).

Industry players say it is unclear what defines a 'residential property' that would incur the duties: Is it the approved use of the units or the zoning of the land under the Urban Redevelopment Authority's (URA) masterplan?

They add that queries to the Inland Revenue Authority of Singapore (Iras) have generated varying replies, especially regarding units in mixed-use land zoning.There also seems to be difficulty pinning down exactly how the ABSD will be applied because the latest e-tax guide is unclear 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'. But there are exceptions. This would include property given only temporary approval for commercial use by the URA such as a residential shophouse being granted temporary approval as an office or shop space.

In such cases, the seller's stamp duty of up to 16 per cent applies. But commercial units in condominiums - minimarts, for example, or salons - on the ground floor of certain blocks that have obtained long-term approval for such use are unlikely to be slapped with either of the stamp duties.

The Iras spokesman 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 elaborate on what exactly these criteria are.

While there are probably few commercial units that will be subject to the extra stamp duties, experts say the lack of clarity only throws up 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 devise a clearer definition of 'residential property' for the application of ABSD.

The ABSD should be applied based on the approved use given by URA rather than the zoning of the land under the URA masterplan, he said. 'According to the e-tax guide, Iras seems to look at the masterplan zoning in order to determine whether the approved use is residential in whole or in part. 'But the masterplan 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 land sites such as Eon@Shenton that have attained URA approval for residential, office and retail uses. There are also approved commercial units built on land zoned fully or partially residential under the masterplan.

'Iras should quickly address this definition issue of residential property so that members of the public and lawyers are able to discern whether ABSD is payable in the purchase of specific property which has approved use different from the zoning,' he added.