Blog

A MOTHER and son on Friday (Feb 28) were each sentenced to two weeks’ imprisonment, for providing false and misleading information to the taxman during an audit of a “99-to-1” property purchase arrangement.

Ng Chiew Yen, 56, and Keith Tan, 26, were convicted of two charges each for violating the Stamp Duties Act. Both consented to three similar charges being taken into consideration for the purposes of sentencing.

These offences are punishable with a maximum sentence of a fine not exceeding S$10,000, or an imprisonment term not exceeding two years, or both.

This is the first prosecution and conviction involving taxpayers who provide false and misleading information to the Inland Revenue Authority of Singapore (Iras) over the two-step “99-to-1” property transactions.

The arrangements typically involve individuals without any prior property. They buy residential properties in their names initially. Within a short period of time, they sell a small share of the property – such as 1 per cent – to other individuals who have a higher Additional Buyer’s Stamp Duty (ABSD) profile.

By structuring the transaction in this manner, ABSD would be payable only on the 1 per cent share of the property – rather than its full value, if the purchase was done jointly at the onset.

Investigations revealed that Tan bought a condominium unit at the 99-year leasehold The Watergardens at Canberra in Sembawang in his sole name on Sep 24, 2021. He subsequently sold a 1 per cent share of the property to his mother.

Iras began an audit into the transactions in 2023.

During the audit, Tan made false statements to the authority. He claimed that he had made a hasty decision to purchase the property, with the understanding that his family would support him financially. He said that they were subsequently unable to do so. As a result, his mother had to be added as a joint owner in order to take a mortgage.

But Iras disputed Tan’s account. It said that the mother-son duo did not jointly purchase the property at the execution of the sale and purchase agreement because they wanted to avoid ABSD.

The pair had drafted different versions of the e-mail reply to Iras, and discussed the drafts before Tan replied to the tax authority.

When Iras asked Tan to provide the WhatsApp messages between his mother and the banker for the mortgage, Tan provided misleading information to the authority in the form of incomplete WhatsApp messages.

Both went through the messages with the banker, and deleted the ones that they felt contradicted their false statements to the authority.

The Commissioner of Stamp Duties assessed in June 2023 that the ABSD for this transaction was S$130,779 and also imposed a 50 per cent surcharge of S$65,389.

The two-step “99-to-1” audit is part of its regular ones to uncover arrangements that are entered into for the purpose of reducing or avoiding stamp duty. Whether a case is deemed to be tax avoidance depends on the facts and circumstances of each one, Iras said on Friday.

Should it determine that tax avoidance has taken place, it will recover the rightful amount of stamp duty from the buyers, and may impose a surcharge of 50 per cent of the additional duty payable. There is no statutory time limit for stamp-duty audits.

As at April 2024, Iras has reviewed 187 of such “99-to-1” cases, of which 166 were found to have involved tax avoidance. Accordingly, about S$60 million in ABSD and surcharges will be clawed back.

Purchasers who have entered into two-step “99-to-1” arrangements should voluntarily disclose them to Iras, it advised. It added that it is prepared to consider such cases more favourably, depending on the circumstances.

A reward based on 15 per cent of the tax recovered, capped at S$100,000, will be given to informants, if the information provided leads to a recovery of tax that would have otherwise not been paid.

All payments are at the discretion of the commissioner. The identities of informants are kept strictly confidential.