Introduction

As the amount of Additional Buyer’ Stamp Duty is increased as part of the cooling measures to control the prices in the property market, we have seen an increase in property purchases utilising trust structures. In this month’s conveyancing article, we explore the implications of property tax and Seller’s Stamp Duty on residential real estate that is held on trust.

Property tax

IRAS’ website states that:-

Property tax is payable by the person who receives rent from a property, whether on his own account or as agent or trustee for another person; or who would receive the same if the property were let to a tenant and includes the person whose name is entered in the Valuation List.

From the above, it can be seen that it is the responsibility of the trustee to pay the property tax levied on the property that is held on trust, regardless of who the beneficiary(s) is/are.

Depending on the contents of the trust deed, the trustee may be able to apply the rental income towards the property tax obligations. Settlors should set aside a certain sum to fulfil such obligations for the times when the property is not rented out, or if the intention is for the beneficiary to reside in the property and not rent it out at all.

Property tax rates

Residential property is subject to either the owner-occupied rate or the non-owner-occupier rate.

For property that is held on trust, whether owner-occupier rates or non-owner-occupier rates apply depends on whether the trustee is residing in the property.

As the trustee is the legal owner of the property, he/she is listed as the owner of the said property. If the trustee is not residing in the property, then the applicable property tax rate is the non‑owner‑occupier rate, regardless of whether the beneficiary is residing in the said property.

Conversely, if the trustee is residing in the property, then the applicable property tax rate is the owner-occupier rate, even if the beneficiary is not residing in the property.

Seller Stamp Duty

Seller Stamp Duty (“SSD”) may also be payable if the property is sold or transferred out from the trust.

SSD is payable on all residential properties and residential lands that are acquired on or after 20 Feb 2010 and disposed of within the holding period.

Depending when the property is acquired, the holding period can be either 1 year, 3 years or 4 years.

Since 11 March 2017, the holding period is fixed at 3 years.

Whether SSD is levied on the transaction depends on the nature of the transaction, and the contents of the trust deed when the trust was established.

If it were a disposal (eg, a sale or a gift) before the property is transferred to a beneficiary, then the relevant date of acquisition would be the date the property was transferred into the trust.

If it were a disposal after the property is transferred to a beneficiary, then it will depend on whether the property was held on trust for identifiable individual beneficiary(s).

If it were a trust for non-identifiable individual beneficiary, the relevant date of acquisition would be the date the trust was transferred to an identifiable individual beneficiary.

If it were a trust for identifiable individual beneficiary(s), and the disposal is after the transfer to the said identifiable individual beneficiary(s), then the relevant date of acquisition would be the date of transfer of the property into the trust.

Below are three scenarios for illustration:-

Scenario 1

A trust was established in June 2022 to hold residential property for Beneficiary A. In January 2024, with Beneficiary A’s permission, the trustee sells the property to a third-party without first transferring to Beneficiary A.

The relevant date of acquisition in this instance is June 2022, when the trust was established and the residential property transferred into the trust. As the holding period is between 1 to 2 years, the SSD payable is 8% of the market value or transaction price, whichever is higher.

Scenario 2

A trust was established in June 2020 to hold residential property without an identifiable individual beneficiary. In January 2024, the residential property was transferred to Person B.

The relevant date of acquisition should Person B wish to sell the residential property is January 2024, when Person B acquired the residential property from the trust.

Scenario 3

A trust was established in June 2022 to hold residential property for Beneficiary C. In January 2024, Beneficiary C turned 21 years old, and in accordance to the trust deed, the residential property is to be transferred to Beneficiary C, and is so transferred.

In the event that Beneficiary C intends to sell the residential property whether in 2024 or later, the relevant date of acquisition is June 2022, where the trust was established and the property was transferred into the trust.

Conclusion

Here at Sim Mong Teck & Partners, our experienced conveyancing team have a wealth of experience and knowledge on property related matters. This allows us to provide you with sound and practical advice on your queries.

Should you have any questions pertaining to your property or other conveyancing matters, please reach out to our lawyers or Business Development team.