What You Need To Know About Seller Stamp Duty In Singapore

Seller Stamp Duty Singapore - Feature Image

There is one cost that property sellers and transferors forget when making a sale – the effect of seller stamp duty on sale proceeds. Keep in mind that taxes can sum up to thousands, and these costs should play a part when making your decision on the property price.

In this article, we will guide you through taxes charged when selling or leasing property. We will provide details on how it is charged and insights on ways you can save some money on these tax costs.

SSD Definition & Calculation

What Is Seller Stamp Duty (SSD)?

Stamp duty is the tax charged on legal documents related to residential property transactions and is payable to the Inland Revenue Authority of Singapore (IRAS).

Here is an overview of the three types of stamp duty:

  • Seller’s Stamp Duty (SSD) – charged to a seller on selling price
  • Buyer’s Stamp Duty (BSD) – charged to a buyer on the purchase price
  • Additional Buyer’s Stamp Duty (ABSD) – levied on top of BSD to foreigners and non-individuals buyers making their first buy, Singaporeans buying their second property and subsequent purchases, and permanent residents buying their first and subsequent properties

A more precise definition of Seller’s Stamp Duty is taxes paid on residential properties purchased on or after 20th February 2010 and sold within the minimum holding period. Examples of residential properties are condominiums and flats. The tax is charged on either the selling price or valuation of the asset in question, whichever is higher.

SSD is effected during the transfer of property within a family as well, such as when a couple divorces and one spouse receives the residence in terms of the divorce settlement.

There is no seller stamp duty for commercial property but the IRA charges SSD for industrial properties, such as factories acquired on or after 12th January 2013 and disposed within the minimum holding period.

The property tax is charged on the selling price or market value, whichever is higher. You or your finance manager can stamp online through the e-stamping portal, and print the stamp certificate.

In addition, people renting out homes are liable to make payment of lease duty rates to the government. The total payable depends on:

  1. Actual monthly rent or market rent, whichever is higher
  2. Tenure period

If the tenancy contract is four years or less, the duty rate is 0.4% of the total rent for the period. Tenancy beyond four years is charged as 0.4% of four times the average annual rent (AAR). An average annual rent that does not exceed $1,000 gets an exemption.

For example, if a person rents out a residence for $5,000 a month for 2 years, we will convert the 2 years to months:

Total rent for the period = $5,000 x 24 months = $120,000

Amount payable = 0.4% x $120,000 = $480

If the period is more than four years:

Average annual rent = $5000 x 12 months = $60,000

Amount payable = 0.4% x 4 x $60,000 = $960

Reasons For Paying SSD

Why Do You Need To Pay Seller Stamp Duty?

Property flipping is the practice of buying a place for the purpose of reselling at a profit. A house flipper does not wait for the value to increase in order to resell and it leads to the upward shooting of properties.

One of the cooling measures the government has adopted to keep residential property prices affordable is through a tax on sale of property in Singapore. By setting a minimum holding period for SSD, it discourages house flipping.

Factors Affecting SSD Payment

5 Factors Surrounding The Total SSD Payable

Here are the stamp duty (SSD) rates applicable on residential properties

Seller stamp duty industrial rates are as follows:

Based on these SSD rates, the following five factors will form the basis of the money you end up paying.

1. Selling Price

The amount you sell the house for determines the SSD payable. If for example you bought a condominium on 15th July 2019 and sell it on 14th October 2020 for $2,500,000, the $2,500,000 will be multiplied by the SSD percentage rate.

2. Current Market Value

If you sell at a price lower than the current market value, the market value will be used to determine the Singapore seller stamp duty payable. Let’s assume that a valuation of the condo in our illustration puts its worth at $2,800,000. The SSD rate will remain unchanged but the valuation of $2,800,000, which is higher than the price of $2,500,000, will determine your tax obligation.

3. Number Of Years You Own The Property

If you purchased on or after 20th February 2010, the years you’ve owned the place or holding period determines the rate for the SSD payable.  You can avoid additional seller stamp duty by holding properties for longer than the minimum occupation period.

Property's Tenure

4. Time Of Transaction

The time you make the transaction determines the rate for paying the seller’s stamp duty Singapore. It can be at the point of acceptance of the option to buy or the date of the Sale and Purchase Agreement. If none of this is available, the date of property transfer, change of zoning, or change of use can apply.

Increasing the time you hold the property is an effective way to reduce the SSD charged, a single year can result in a huge difference. For instance, holding a commercial property for more than 2 years attracts an SSD rate of 5% while holding it for 1 year attracts 15%. There are ways you can reduce the SSD rate to zero like in the following scenarios:

  • For a residential purchase between 20th February 2010 and 29th August 2010, the owner is not eligible to pay seller stamp duty after a year
  • Home-owners who buy between 30th August 2010 and 13th January 2011 are not required to pay SSD after owning the residence for more than three years
  • Houses bought between 14th January 2011 and 10th March 2017 do not attract stamp duties in Singapore after a holding period of four years
  • Property owners who buy their properties after 11th March 2017 are not required to pay SSD after three years
  • Commercial properties held for more than three years are not charged SSD

5. SSD Percentage Rate

The percentage rate is determined by two main factors – the date of acquisition and the holding period. In our condominium illustration, the date of purchase is 15th July 2019 and the date of selling is on 14th October 2020. The holding period is, therefore, 2 years and one day short of 3 months.

In the SSD Singapore rates table:

a) The purchasing date is after 11th March 2017.

b) The holding period is in the second column. And in our scenario, the condo falls under ‘more than 1 year and up to 2 years’, which carries an SSD rate of 8%.

The price of the condo is $2,500,000 and its valued at $2,800,000. We pick the higher of the two.

SSD payable will be $2,800,000 x 8% = $224,000

If in another scenario, an appraiser values the condo at $2,200,000, the amount used in the calculations changes to the selling price of $2,500,000.

SSD payable will be $2,500,000 x 8% = $200,000

Exemptions From Paying For Developers

Exemptions From Paying SSD

There are a number of circumstances where an approval from the Commissioner of stamp duties is not needed for a seller or transferor to be exempted from paying stamp duty.  

Licensed Developers

When housing and industrial property developers licensed and regulated by the Housing Developers (Control and Licensing) Act are selling properties they have developed, they are exempted from sellers stamp duty Singapore. The rest of the developers without a licence may qualify for remission of SSD if they are registered as a company. These entities should also be operating lawfully.

Public Authorities

If public authorities like The Housing & Development Board (HDB) or the JTC Corporation are selling a residence as an exercise of their functions and duties, they are exempted from SSD.

An Acquisition under the Law

In a situation where the Government has acquired a home under the Land Acquisitions Act.

Bankruptcy

In case of residential property owners selling their houses as a result of bankruptcy or companies disposing of residential properties after an involuntary winding up, the two cases are exempted from stamp duties Singapore.

Foreigners Abiding To The Residential Properties Act

Foreign nationals who are selling residential properties as is the requirement in the Residential Properties Act are exempted from paying SSD.

SSD Exemptions - Re possession Of Flat

In Case Of Repossession By HDB Or SERS

HDB flat sellers whose flats have been repossessed by HDB or as a result of the Selective Enbloc Redevelopment Scheme (SERS) need not make payment of seller stamp duty. [1]

HDB flat owners who bought their flats on or after 30th August 2010 and whose homes have been identified for the redevelopment scheme SERS but sell in the open market before repossession of the flat are also exempted.

Disposal Under The Rules Of The Statutory Board Of The Government Of Singapore

Last but not least of the considerations given is that seller stamp duty for private property is not applicable in transactions that occur on or after 18th December 2015 under one of the following scenarios:

  • HDB flat owners who receive an additional flat as an inheritance and are required under the HDB’s rules to dispose of one of the flats
  • An individual owning a non-HDB flat and inherits an HDB flat and is required under the HDB regulations to dispose of the HDB flat
  • HDB flat owners who are in a marriage and are required under the HDB rules to dispose of the flat of one spouse

Conclusion

The administrative costs incurred in the course of selling residential properties can take a large share of your returns, and adding seller stamp duty rates makes it worse. But with the right information, you can reduce these taxes.

For instance, find a way to hold the property for longer. It will make a significant difference in the tax obligation. You can also include the cost of SSD in the property prices.

Follow these tips or get the service of a tax advisory company to guide you and provide insights on your more specific needs. The FAQ page of the IRAS website also contains real-life stories that may be of interest and help to you.

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