IRAS Clamping Down on ‘99-to-1 Loophole’. Is This Arrangement Illegal Now?

On May 7, Prime Minister Lawrence Wong stated in a parliamentary reply that the '99-to-1' arrangement is used by some property buyers to avoid paying the full Additional Buyer Stamp Duty (ABSD) on residential properties.

As of April 2024, the Inland Revenue Authority of Singapore (IRAS) has discovered a high percentage of 166 tax avoidance cases from their review of 187 cases involving ‘99-to-1’ schemes. 

The ABSD clawback and its surcharges amount to about $60 million.

Before we get into whether this setup is proper and legal, it is important to understand exactly what is a ‘99-to-1’ arrangement when buying a property.

What is the ‘99-to-1’ arrangement?

It is a manner of holding a property called “Tenancy-In-Common” where one owner owns a 99% share of the property while the other owners own only a 1% share.

The other type of ownership manner would be “Joint Tenancy” where both owners own 100% of the property with no shares allotment, meaning profit and loss will all be equally shared

So to answer the question: Is the ‘99-to-1” arrangement illegal?

The answer is…yes and no. 

Hold on and hear me out.

It all boils down to intention. If one is using this as a form of tax evasion, it is again IRAS’s Stamp Duties Acts, while the other is using this to form a proper ownership arrangement due to loan or personal arrangement issues.

The CORRECT (LEGAL) ‘99-to-1’ arrangement

Imagine a scenario where two Singaporean Citizens (SC) want to purchase a property jointly. At the point of purchase, they decided to hold the property through tenancy-in-common with the split shares of 99% and 1%. 

One of the SC already owned another Singapore residential property while the other did not own any. Thus, when the two SCs bought this new residential property, they had to pay the full ABSD for the property, which is 20% of the purchase price. 

The current ABSD rate is as shown below:

Source: IRAS

In such a way, this is the only legal manner for the ‘99-to-1’ arrangement, where there is no intention of tax avoidance and all the owners oblige to the proper IRAS’s Stamp Duties Acts.

Exploitation of the ‘99-to-1’ arrangement for tax avoidance

Mr Wong went on to say “When such property purchase arrangements are made to reduce the tax payable, the Commissioner of Stamp Duties is empowered under Section 33A of the Stamp Duties Act to disregard the individual transactions and assess them as a single joint purchase, and to recover the rightful amount of ABSD due, along with a 50 per cent surcharge,”

Let’s apply the same scenario: Two SCs jointly purchase a residential property. One of them doesn’t own any Singapore residential property while the other owns one.

However, to avoid paying the full ABSD, the SC who does not own any Singapore residential property decided to purchase the new residential property first, owning 100% of it.

Shortly after becoming the owner of this new residential property, he/she decides to sell a 1% share of the property to the second SC who already owns another Singapore residential property.

In such an arrangement, the owners only have to pay 20% ABSD on the “1% of the purchase price”

For example, if the purchase price is $1 million, with such an arrangement they would only have to pay $2,000 in ABSD compared to $200,000. 

According to IRAS, breaking a single purchase into multiple steps to lower the amount of ABSD paid is considered a tax avoidance offence.

So what is the PENALTY?

If the ‘99-to-1’ arrangement is found to have the intention of avoiding tax payable, IRAS will recover the deficient duties plus imposing a 50% surcharge on it.

Using the same scenario as above, below is a breakdown of how IRAS recover the deficient duties and surcharge.

 Source: IRAS       Graphic: Ernest Goh


Although if we were to look at this ‘99-to-1’ arrangement theoretically, there seemed to be nothing legally wrong with purchasing a property and then selling 1% of it to another buyer. However, in this case, the intention of doing so will be the deciding factor whether the owner is guilty of tax evasion or not.

If the intention to avoid tax is verified, this constitutes an offence under the Stamp Duties Acts.

Thus, it is important for buyers to always seek professional advice from lawyers and tax advisors before structuring such an arrangement when purchasing a property.