How to Legally Skip That Massive Property Tax in Singapore

We get it — you’re ready to buy a property in Singapore, and you’ve probably already imagined yourself sipping coffee in your new condo with a panoramic view of the city. But before you sign those papers, there’s one thing you need to know: ABSD (Additional Buyer’s Stamp Duty) is lurking, ready to take a significant bite out of your wallet.

ABSD can seem like a massive roadblock when you’re trying to buy your second or third property in Singapore. But don’t worry — we’ve got the smartest ways to avoid ABSD legally. So, let’s talk about how you can sidestep this sneaky tax and still make a savvy property investment.

Step 1: First Things First — Understand the ABSD Rules

You can’t avoid ABSD if you don’t understand it. So let’s break it down in simple terms.

ABSD is a tax that applies to second and subsequent residential property purchases in Singapore. The government implemented it to cool down the property market and limit speculation. Here’s the kicker: it doesn’t apply to your first home (lucky you).

ABSD hits when:

• You’re buying your second property and beyond.
• You’re a Permanent Resident (PR) or foreigner purchasing a property.

Singaporean citizens buying their first home are ABSD-free, but if you’re buying that second property, get ready to pay a tax that can go up to 12%, depending on your citizenship and whether you’re a PR or foreigner.

Here’s where it gets tricky: ABSD applies to residential property purchases, and the tax percentage varies based on your status. But enough about that — let’s get to the good stuff: how to avoid ABSD.

Step 2: Buy Your First Property — ABSD-Free Bliss

This is the obvious one, but let’s say it anyway: Buy your first property, and you’re good to go.

If it’s your first residential property, you’re in the clear. No ABSD. Zero. Nada.

Now, you might be wondering: “But what if I’ve already bought something? Can I still avoid ABSD on my next property?” Well, hold that thought, because there are ways to work around it, and we’ll get to that shortly.

Step 3: Decouple Property Ownership

If you’ve already bought a home with your spouse or partner, decoupling could be your golden ticket to avoiding ABSD on your second property.

Property decoupling is the process of separating joint ownership of a property so that one party remains the sole owner. This allows one person to buy a second property without incurring ABSD.

If you and your spouse have a property together, decoupling allows one person to keep the property while the other gets to purchase a second property without the ABSD penalty. It’s like playing chess with the taxman — and winning.

But hold up: Decoupling isn’t a free pass. You’ll need a lawyer to handle the legalities and be financially prepared for the associated costs. But if you’re looking to grow your property portfolio and avoid paying ABSD, it’s a solid strategy.

Step 4: Buy Commercial Property Instead of Residential

Here’s a clever loophole: If you buy commercial property, you can skip ABSD altogether.

Commercial properties, such as shophouses, office units, and industrial buildings, aren’t subject to ABSD.

Now, we’re not saying you should start buying every shophouse you can find, but if you’re willing to invest in a non-residential property, this can be a way to build your portfolio without paying that pesky tax.

Yes, commercial properties come with their own set of challenges (think higher rental yields, more management responsibilities), but it’s a valid way to grow your assets while avoiding ABSD.

Step 5: Sell Before You Buy — Timing Is Everything

This strategy involves some strategic timing, but it’s worth considering if you’re looking to make your second property purchase while avoiding ABSD.

In order to avoid ABSD, you might consider selling your first property before purchasing your second one. Selling your first property means you’re no longer an “existing property owner” in the eyes of the government, which allows you to buy a second property as if it were your first.

You’ll need to get your timing just right, though. If you’re relying on the proceeds from the sale to fund your next purchase, the transaction timelines need to align, and you’ll have to be financially flexible to manage this in-between period.

Step 6: Buy with Your Spouse or Family

Another sneaky strategy to avoid ABSD is to purchase property with your spouse or a family member. Here’s why: property ownership is counted separately for each individual.

If your spouse hasn’t bought any properties before, you could jointly purchase a second property in their name, avoiding ABSD. It’s like sharing the responsibility (and benefits) of property ownership.

This approach also works for family units. If you have a parent or child who hasn’t owned property, they could purchase a property in their name and avoid ABSD.

But here’s the catch: The person buying the property has to be in good financial standing to secure a mortgage, and the property has to be genuinely owned by that individual. Be careful with this strategy to ensure everything’s above board.

Step 7: Timing and Tax Planning

When all else fails, you can also plan tax-efficiently by timing your purchases carefully. For example:

You could also consider purchasing properties in phases. Buy the first property now, wait a few years, and then purchase your second property once you’ve sold or decoupled your first. This gives you time to manage finances and minimize taxes.

Tax planning doesn’t mean avoiding taxes completely, but it does mean strategizing the most efficient way to build your property portfolio without paying more than you need to.

Final Thoughts: Play Smart and Avoid ABSD

ABSD doesn’t have to be the villain in your property investment journey. By leveraging strategies like decoupling, buying commercial property, or simply timing your purchases right, you can avoid ABSD legally and build your property portfolio at the same time.

The key? Plan ahead. Understand the tax landscape, consult with professionals, and make smart decisions about when and how to buy. Whether you’re looking for your first property or eyeing your second, the right strategy can make all the difference.

So, what are you waiting for? Get started on your property investment journey, avoid that nasty ABSD, and build the portfolio you’ve always dreamed of!