As its name suggests, the arrangement involves one buyer owning 99 per cent of a property while the other holds a 1 per cent share.
This is not illegal, but when the 99-to-1 home ownership ratio is used to avoid additional buyer’s stamp duty (ABSD), it becomes an issue.
Take for instance Singaporeans Mr A and Ms B, who jointly buy a S$1 million home. Mr A already owns another property and would therefore have to pay an ABSD of 20 per cent, or S$200,000, on the new property.
If the 99-to-1 intention is declared at the outset, the 20 per cent ABSD is payable as long as one party is an existing property owner.
However, some buyers try to get around the ABSD by entering a two-step 99-to-1 arrangement.
This involves individuals without any prior properties buying homes 100 per cent in their name initially, then selling a small share of it – 1 per cent – to another person who already has another property and therefore has a higher ABSD profile. The share transfer typically occurs within a very short period of time.
In the case of Mr A and Ms B, if Mr A buys over a 1 per cent share, his share of the S$1 million property is S$10,000. Therefore, he has to pay an ABSD of 20 per cent of S$10,000 – that is, S$2,000.
This two-step transaction enables Mr A to avoid paying additional taxes while still being able to jointly apply for a home loan with Ms B.
While 99-to-1 transactions are not new, the issue became a talking point in April 2023 when authorities said that IRAS had initiated audits, after detecting a small but rising number of such arrangements in recent years.
It also comes amid a backdrop of rising ABSD as part of property cooling measures.
Since Apr 27, 2023, Singaporeans must pay 20 per cent in ABSD, up from 17 per cent, when purchasing a second property, and 30 per cent on subsequent purchases.
Those figures are higher for permanent residents and foreigners.
