The recent Budget 2011 announcement on 18 February 2011 by the Minister of Finance saw some changes to stamp duty regulations that will impact landlords and tenants of all kinds of properties in Singapore.
In this circular, we highlight to you, our clients, the following changes that may interest you:
- The Removal of Fixed and Nominal Duties
Most fixed and nominal stamp duties will be removed with effect from 19 February 2011, for documents dated on or after 19 February 2011. Please note that for documents executed in escrow, IRAS has confirmed, in our phone enquiry with them, that only the date of document is relevant, not the date it was signed.
In connection with these changes, IRAS has issued an IRAS e-Tax Guide dated 18 February 2011 (the "IRAS Circular on Removal of Fixed and Nominal Duties") to clarify the scope and the details of the removal of fixed and nominal duties.
Table A below sets out the list of documents for which nominal stamp duties, previously payable, are no longer payable if such the documents are dated on or after 19 February 201:
Click here to view Table A.
In addition to the above, fixed stamp duties previously payable on the lease-related documents in Table B below are now no longer payable if such lease-related documents are dated on or after 19 February 2011:
Click here to view Table B.
We would also like to highlight that the following have not changed:
- Position on stamping of Letters of Offer has not changed:
Where the first contractual document evidencing the lease of the property is a Letter of Offer issued by the landlord and accepted by the tenant, IRAS has reminded all in its circular dated 2 July 2007(http://www.iras.gov.sg/irasHome/page.aspx?id=910) that such accepted letter of offer is chargeable with ad valorem stamp duty as an agreement for lease in accordance with the rates set out in Article 8 of the First Schedule to the Stamp Duties Act.
- Position on stamping of Tenancy Agreement or Lease Agreement where there is no Letter of Offer has not changed:
Where the landlord and tenant enter directly into a Tenancy Agreement or Lease Agreement without the issuance of a letter of offer or entering into an agreement for lease, such Tenancy Agreement or Lease Agreement will be subject to ad valorem stamp duty.
- Manner of computation of ad valorem stamp duty has not changed:
Ad valorem stamp duty is defined in the IRAS Circular on Removal of Fixed and Nominal Duties as "a duty based on the amount of value of consideration paid". i.e. it is not only payable on the amount of the rental but also on any other consideration payable under the Lease documents.
In particular, note that though a licence on its own (i.e. not granted in conjunction with a lease) is not chargeable with stamp duty under the Stamp Duties Act, IRAS takes the position that where a written licence is granted together with a lease, the consideration for the licence is chargeable with the same duty as the consideration for the Lease (pursuant to Article 8 of First Schedule to the Stamp Duties Act) as consideration for the "provision of services or facilities or to other matters or things in connection with such lease" (emphasis added).
- The Stamp Duty Remission for Aborted Leases
Another area of change is the grounds for refund of stamp duty paid for aborted leases.
The position before 19 February 2011: a tenant or landlord may claim refund on the stamp duty paid on an accepted Letter of Offer, agreement for lease or tenancy agreement/lease only in the circumstances listed in Section 57 of the Stamp Duties Act which are as follows:
- The contract was found to be void from the beginning;
- The contract was found to be unfit for the purpose originally intended, due to an error or mistake in the contract;
- The contract is incomplete and insufficient for the purpose intended, due to the inability or refusal of a party to the contract to sign or complete the transaction and such contract has not been made use of for any purpose whatsoever;
- The contract fails its intended purpose or becomes void, by reason of the inability or refusal of any person to act under the instrument, or for registration within the time required by law;
- Another document is made between the same parties, for the same purpose, is executed and duly stamped.
The position on or after 19 February 2011: a tenant or landlord can now claim stamp duty refund paid in excess of $50 for aborted lease contracts if the following conditions are satisfied:
- The Lease or Agreement for Lease is rescinded on or after 19 Feb 2011;
- The tenant or lessee has not rescinded the Lease or Agreement for lease with a view to facilitating the lease of the property by the lessor to another person;
- The executed Lease or Agreement for Lease has not been made use of for any purpose (i.e. relied on/acted on/performed/enforced);
- The lease period of the property has not commenced;
- The application for remission is made within 6 months from the date of rescission of the Lease or Agreement for Lease or within such further time which the Commissioner may otherwise allows; and
- The original Lease or Agreement for Lease is surrendered to the Commissioner of Stamp Duties for cancellation.
If the remission is approved, the lessee or tenant will pay stamp duty of $50. Please note that where the stamp duty paid is less than $50 in the first place, there is no refund and none of the above applies.
The above was extracted/adapted from the Inland Revenue Authority of Singapore (IRAS) website. Visit www.iras.gov.sg for more information.