When acquiring property in Singapore, a homebuyer or investor must contend with the major expense of stamp duty. But just what is this tax, and how does one go about calculating it in a way that allows for a smooth home-buying experience? Most importantly, what kind of fiscal impacts might it have on a property purchase? The following article gives a simple breakdown of these concepts in a way that’s hopefully accessible to most readers.
What is Stamp Duty?
In Singapore, a tax called stamp duty is imposed on property transactions. This tax applies to both residential and non-residential properties and comes into play when you are transferring the ownership of a property. The levy acts as an enforcer, formalising the transaction and ensuring that it is legally binding. The amount you pay depends on just how valuable the property is—its purchase price or its market value, whichever is higher.
How is Stamp Duty Calculated?
Stamp duty is calculated based on a tiered-rate system and is imposed on the purchase price or market value of a property. For residential properties, the types of rates that are in play are as follows:
- 1% on the first $180,000 of the purchase price or market value;
- 2% on the next $180,000;
- 3% on any remaining amount above $360,000.
So if you were to purchase a property for $500,000, the stamp duty might be something like this:
- 1% of the first $180,000 = $1,800;
- 2% of the next $180,000 = $3,600;
- 3% of the remaining $140,000 = $4,200.
Thus, when all is said and done, the total amount you might end up paying the tax collector is $9,600, which is actually a little less than 2% of the property value at the time of purchase.
The Importance of Calculating Stamp Duty
It is crucial to comprehend the amount of stamp duty you will need to pay. This ensures better preparation for the costs tied to becoming a property owner. On top of the price for the property itself, there are associated costs like legal fees and insurance. The sum of these costs can easily push you over your intended budget. Knowing what you will pay for stamp duty helps keep your plans on track.
Using the IRAS Stamp Duty Calculator
The Inland Revenue Authority of Singapore (IRAS) has provided an excellent tool to simplify the process. The tool is a calculator for stamp duty. The way it works is this: You enter either the purchase price or the market value of the property. The calculator then automatically figures the amount of stamp duty you need to pay. It’s a straightforward system that gives you an accurate figure to work with when considering the costs involved in buying a property.
Frequently Asked Questions
- Can you get stamp duty back?
Most of the time, you can’t get stamp duty back, but in a few rare situations, you might be able to clinch a refund. For instance, if you call off the entire property deal before it gets all tied up with the lawyers, you might have a case for getting the stamp duty back. As with most things in life, it’s best to get the lowdown on all possible scenarios from the horses’ mouths—the relevant authorities. That way, you’re all set for a no-surprise property purchase.
- Is there stamp duty on the purchase of both new properties and resale properties?
Yes, there’s stamp duty on both new and resale properties. Whether the property was just built or has been lived in before, you’re likely to be hit with the same calculation.
- Do foreigners pay extra tax when buying property?
Yes, they do; and the extra layer of tax they pay on top of the already hefty stack of property costs has a charming name: the Additional Buyer’s Stamp Duty, or ABSD for short.
When purchasing real estate in Singapore, it is imperative to understand not just what the stamp duty is but also how it is computed. The IRAS stamp duty calculator is a useful tool for approximating what one’s obligation might be, and for blending that figure into the overall budget that one must create in order to make a go/no-go decision for purchase. Being well-versed in the specifications and particulars of this tax avoids any unexpected surprises when one is at the table to sign for ownership.
