Property ‘Decoupling’ May Be Illegal If Used Solely to Avoid ABSD: High Court

A recent High Court ruling has clarified that property decoupling schemes aimed purely at avoiding Additional Buyer’s Stamp Duty (ABSD) could be considered tax evasion.

This comes after a legal dispute involving an unmarried couple who had co-owned a property in a 99-to-1 share split. The arrangement was originally planned to allow the minority owner to exit the first property and purchase a second one without triggering ABSD.

Although the decoupling did not take place, the court examined the intent behind such structures. Justice Lee Seiu Kin stated that while 99-to-1 ownership splits are legal, using them to dodge ABSD—especially if the minority owner continues to retain a secret beneficial interest—can amount to tax fraud and under-declaration of stamp duty.

What Is Decoupling?

In property, decoupling refers to one co-owner selling or transferring their share of a jointly owned property to the other, usually a spouse, so they can buy another residential property in their sole name without being subject to ABSD.

According to the judge, if the transfer is merely on paper and the original co-owner continues to benefit from the property, the Inland Revenue Authority of Singapore (IRAS) could consider this a sham transaction.

Key Takeaways for Buyers:

• Outright transfers are legal, as long as the transferring party has no further beneficial interest.

• Secret arrangements where the seller continues to share in the property could lead to ABSD penalties and underpaid stamp duty.

• IRAS reviews transactions for commercial substance. If it deems the move artificial or intended to create a tax benefit, enforcement action could follow.

Expert View:

Tax law professor Stephen Phua from NUS said buyers must act in good faith and avoid side agreements. If the true ownership is later disputed—such as in a breakup or lawsuit—the facts could expose the scheme to scrutiny.

He added that professionals, such as lawyers or agents, advising clients on such transfers should be especially cautious and updated on the latest rulings.

IRAS Stance:

While IRAS did not comment directly on the case, it reiterated its position that tax avoidance and evasion are taken seriously. It will investigate cases that appear to lack commercial intent and where false declarations may have been made.

Penalties at a Glance:

• Underpayment of stamp duty on first property if real ownership share is misdeclared.

• ABSD on second property if the first is still effectively co-owned.

• Legal and financial consequences if IRAS takes enforcement action.

Final Word:

Buyers planning to decouple must ensure that the transaction is genuine and legally sound. Any hidden beneficial ownership or intention to circumvent ABSD could attract penalties or prosecution.