Navigating ABSD Concerns: A Guide for Property Owners Who Used the 99-1 Ownership Arrangement

In light of recent developments regarding Additional Buyer’s Stamp Duty (ABSD) and the 99-1 ownership arrangement, many property owners in Singapore find themselves in a precarious position. This article aims to provide guidance for those who have utilised this arrangement and are now concerned about potential tax implications.

This article builds on our previous discussion of ABSD and 99-1 ownership structures in “Legal or Illegal? ABSD, 99-1 Ownership, and Decoupling: A Lawyer’s Perspective”, addressing the pressing concerns of those who have already utilised this arrangement.

Understanding the Current Situation

The Inland Revenue Authority of Singapore (IRAS) has recently intensified scrutiny on property transactions involving the 99-1 ownership split. This arrangement, previously seen as a potential way to reduce ABSD liability, is now under close examination.

Assessing Your Position

If you’ve used the 99-1 arrangement, it’s important to:

1. Review your property transaction details thoroughly

• Examine all documents related to the purchase and ownership structure
• Consider the reasons for the arrangement

2. Understand the potential tax implications, including the full amount of ABSD that may be due
3. Consider the difference between tax avoidance and tax evasion
4. Assess any potential penalties or interest that may have accrued
5. Evaluate the impact on your overall financial and legal situation

IRAS Voluntary Disclosure Programme

IRAS offers a Voluntary Disclosure Programme (VDP) for taxpayers to come forward and disclose any errors or omissions. Key points include:

• Reduced penalties for timely, accurate, and complete disclosures
• A reduced penalty of 5% per annum computed on a daily basis on the stamp duty payable
• Full disclosure must be made before IRAS initiates any compliance checks

Conditions for reduced penalties under VDP:

1. The disclosure is voluntary
2. The disclosure is complete
3. The taxpayer cooperates fully with IRAS
4. The taxpayer pays or makes arrangements to pay the tax and penalties imposed (if any)

Steps to Consider

1. Gather Information

   Collect all relevant documents related to your property purchase and the 99-1 arrangement.

2. Seek Professional Advice

   Consult with a lawyer experienced in Singapore property tax matters. They can assess your specific situation and advise on the best course of action.

3. Consider Voluntary Disclosure

   If appropriate, prepare a comprehensive disclosure including all relevant details of your property transaction and the 99-1 arrangement used.

4. Cooperate Fully

   Be prepared to provide any additional information requested by IRAS and to address any outstanding tax liabilities.

For detailed guidance on the voluntary disclosure process for various tax types including Income Tax, GST, Withholding Tax, and Stamp Duty, refer to the IRAS Voluntary Disclosure Programme e-Tax Guide.

Potential Outcomes

The consequences of using the 99-1 arrangement can vary depending on individual circumstances and how the situation is addressed:

• Voluntary disclosure may lead to reduced penalties
• Failure to disclose could result in more severe penalties if discovered by IRAS
• In cases deemed as willful tax evasion, there may be a risk of prosecution

Breaking News: First Prosecution for 99-1 Scheme

On September 22, 2024, Channel News Asia reported the first prosecution related to the 99-1 property ownership scheme. A mother and son have been charged with providing false information to IRAS regarding a 99-1 property purchase.

Key points from this landmark case:

• The accused allegedly lied about their relationship to avoid paying ABSD.
• They face charges under the Stamp Duties Act for providing false information.
• If convicted, they could face up to two years in jail, a fine of up to S$10,000, or both.

This case underscores the seriousness with which authorities are treating potential misuse of the 99-1 ownership structure.

Read the full article here, and explore our stance on the legality of the 99-1 structure in our other article here.

How Guardian Law Can Assist

At Guardian Law, we specialise in navigating complex property tax issues. Our experienced team can provide:

1. Legal Assessment: We’ll review your situation and clarify your legal position.
2. Strategic Guidance: Our experts will develop a tailored strategy to address your ABSD concerns.
3. Voluntary Disclosure Support: If appropriate, we’ll guide you through the IRAS Voluntary Disclosure Programme.
4. Representation: We can represent you in discussions with IRAS, aiming for the most favourable outcome.
5. Compliance Planning: We’ll help ensure your future property transactions remain compliant with Singapore’s tax laws.

Conclusion

If you’ve used the 99-1 arrangement and are concerned about potential ABSD implications, it’s crucial to act promptly and seek professional legal advice. Each case is unique, and the appropriate course of action depends on individual circumstances.

Need Help?

Frequently Asked Questions

What is the 99-1 property ownership arrangement?

It's a structure where one owner holds 99% of a property and another holds 1%, often used to minimise ABSD. This arrangement is typically implemented when purchasing a property, with the intent of optimising tax benefits or investment flexibility.

Is the 99-1 arrangement legal in Singapore?

It's legal if there's a genuine reason beyond tax avoidance, but IRAS scrutinises these arrangements closely. The legality depends on the intent behind the structure and how it's implemented, with authorities looking for signs of artificial arrangements.

What are the risks of using a 99-1 arrangement?

Risks include IRAS investigation, potential penalties, and having to pay full ABSD with surcharges. Additionally, it may complicate future property transactions and could be challenged during divorce proceedings or estate distributions.

Can I make a voluntary disclosure if I've used the 99-1 arrangement?

Yes, IRAS offers a Voluntary Disclosure Programme that may result in reduced penalties. This program encourages taxpayers to come forward proactively, which can be viewed more favourably than if IRAS discovers the arrangement during an audit.

How long can IRAS investigate past 99-1 arrangements?

IRAS can review past stamp duty cases without time limitations. This means that even arrangements made several years ago could potentially come under scrutiny, emphasising the importance of maintaining proper documentation.

What should I do if I'm currently in a 99-1 ownership structure?

Consult a lawyer, review your arrangement, and consider voluntary disclosure if appropriate. It's crucial to assess your specific situation, gather all relevant documents, and develop a strategy to address any potential issues proactively.

Can a lawyer help me navigate ABSD concerns related to 99-1 ownership?

Yes, a lawyer can provide legal assessment, guidance on voluntary disclosure, and representation in IRAS inquiries. They can also help you understand the nuances of property tax laws and develop strategies to ensure compliance while optimising your property investments.