What is the 99-1 Loophole and Is It Illegal? Here’s How to Plan ABSD Taxes, Not Evade Them

The mark of a true blue Singaporean isn’t how well he/she can follow the law, it’s about getting around it without breaking it.

But all that becomes tricky when we’re talking about tax. Where do we draw the line between tax planning, tax avoidance, and tax evasion?

Case in point: Additional Buyer’s Stamp Duty (ABSD). The Singapore government has been implementing property cooling measures over the years to make it more difficult for Singapore residents to buy an investment property. In 2021, ABSD for Singaporeans buying second property was increased from 12 to 17%. Third or subsequent properties rose from 15 to 25%.

In response, some Singaporeans, mostly couples, have discovered a loophole to buy a second property without having to pay ABSD. How does the loophole work? More importantly, could it land you in any trouble? We find out.

First up, what is ABSD? 

ABSD is a hefty tax that gets slapped on any Singapore citizen buying a second or subsequent residential property.

All Permanent Residents (PRs) and foreigners have to pay ABSD on all residential property purchases, including a first home.

Here are the current ABSD rates for individuals purchasing property in Singapore:

Residential property being purchased
ABSD rates (property bought on or after 16 Dec 2021)

Singapore Citizen


3rd and subsequent

Singapore PR


3rd and subsequent


So, what is this 99-1 loophole? 

In order to skirt around paying ABSD, some couples engage in a practice known as “decoupling”.

When they buy their first property, they make it such that one of them gets a 99% share of the property, while the other receives a mere 1% share. They’re still buying the property as a couple, so they have the advantage of two incomes when applying for a home loan.

When they find a second investment property they want to buy, the person with the 1% transfers their share to the one with 99%. As the share being transferred is only 1%, the Buyer’s Stamp Duty (BSD) they have to pay is minimal.

Once the transfer is complete, one person will hold 100% of the first property, while the other has nothing. The latter is then able to buy the investment property without paying ABSD, since they do not officially own any other residential properties.

Because of the ratio of shares owned and transferred, decoupling has become affectionately known as the “99-1 loophole”.

How much can you save through decoupling?

ABSD rates start at 17% for Singapore citizens buying a second residential property. That’s 17% of the property price, which is massive.

If you’re buying a $1 million condo unit, decoupling would save you a cool $170,000 in ABSD fees.

Image: Giphy / Friends 

Do note that decoupling seldom involves HDB flats as transfers of HDB property between owners is more restrictive. The HDB ownership transfer rule was tightened in 2016 to only allow transfers in 6 special cases: marriage, divorce, death of an owner, financial complications, renunciation of citizenship, and medical reasons.

Although the prospect of avoiding ABSD can be very tempting, it might not save you as much as you think since decoupling itself requires you to incur certain costs.

When decoupling, you will likely need to refinance your home loan for your first property in the name of the spouse who is receiving the 100% share. What’s more, the spouse relinquishing his or her 1% will have to refund any CPF savings that were used. You’ll also have to factor in legal fees and stamp duties incurred in the transfer of the 1%.

Here are the costs to take note of:

Home loan prepayment penalties
Legal fees
Seller’s Stamp Duty (SSD) if first property was bought less than 3 years ago
CPF – if CPF savings were used to purchase first property, they must be refunded with interest

Why is everyone talking about the 99-1 loophole now?

The 99-1 loophole is typically exploited by Singaporeans, usually couples, to avoid paying ABSD on private property.

Singaporeans have been quietly doing this for a while, but it’s only recently that chatter around the 99-1 loophole has gotten louder. Why? Well, the government got wind of it and has started to investigate. IRAS has begun sending letters to people who’ve bought properties using the 99-to-1 structure to find out whether they did it just to avoid ABSD. If caught, you could be forced not only to pay the amount of ABSD owing, but also slapped with a 50% penalty.

In the case of a couple who tries to save $170,000 on ABSD when buying a $1 million property, they would end up having to pay $255,000. Ouch.

Is decoupling legal?

First of all, decoupling is not considered a crime regardless of why it is engaged in. Provided there has been no lying or cheating involved, it should not be considered a form of fraud or tax evasion, which could get you slapped with criminal charges.

Instead, decoupling with the intent of avoiding ABSD it is considered a form of tax avoidance. While not a crime, tax avoidance can get you fined. In other words, your wallet will cry, but at least you won’t be a criminal.

When are 99-1 transactions allowed by IRAS?

Are there situations in which you can buy property with a 99-to-1 structure without your acts being construed as tax avoidance? Actually, yes.

If you decouple for a bona fide commercial reason, it is considered acceptable by IRAS and you won’t get fined. In other words, there has to be a good reason to do it that does not involve avoiding ABSD.

For instance, let’s say you and your business partner decide to buy a property together. In that case, you might split the property 99-to-1 based on how much each of you is prepared to invest.

How are authorities clamping down on the 99-1 loophole?

Image: Giphy / Ghosted 

IRAS is investigating suspicious-looking transactions involving a 99-to-1 structure of property holding. Anyone found guilty will be slapped with a bill for unpaid ABSD as well as the 50% penalty.

This is a big sum, so some property owners might find it difficult to cough up the ABSD and penalty in time. If not paid by the deadline, IRAS can impose penalties of up to four times the amount owing. Yikes.

Oops, I’ve done something similar (or I’m in the process of doing so), who should I consult to make sure I’m doing the right thing?

Buying a property together with someone else and not sure whether what you’re doing will get you into trouble? Your lawyer should be able to advise. As a general rule, you must be able to supply IRAS with a bona fide commercial reason for buying the property with such a shareholding structure.

For those who have already purchased a property using a 99-to-1 structure and are worried IRAS will come after them, the government is now encouraging people to come forward and make a voluntary disclosure. You will most likely be made to pay the full ABSD sum, but IRAS has kept silent as to whether the 50% penalty will be imposed on those who make voluntary disclosures.

Do you know someone who’s planning to invest in property in Singapore? Share this article with them. 

The post What is the 99-1 Loophole and Is It Illegal? Here’s How to Plan ABSD Taxes, Not Evade Them appeared first on the MoneySmart blog.

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