The risks of using 'decoupling' to own two properties

Parties involved could be taken to task for tax evasion, under-payment of stamp duty

- Tan Ooi Boon

If you are buying property for investment, pay more attention to its affordability and your ownership rights, instead of just focusing on ways to get it cheap by paying less tax.

When you taint a property transaction with a shady ownership arrangement to save on tax, you can actually lose your entire stake in your property and you might not get it back even if you file a claim in court.

Even if you can convince a court to let you keep your share of a disputed property, you will likely be ordered to cough up the dodged taxes plus penalties.

The spotlight has been turned on some of these creative moves to try to circumvent Singapore's tough anti-speculation tax regime for real estate after the High Court found that "decoupling" can land some owners in legal trouble.

The finding is bound to unsettle couples with a two-property dream because decoupling one co-owner takes over their first home entirely - has long been touted as a sure-win move. It seemingly allows the co-owner who sold his or her stake in the first home to a buy a second one without paying the additional buyer's stamp duty (ABSD).

But the court found that those who use decoupling but still consider themselves as co-owners of two properties, albeit held in separate names, can be taken to task for tax evasion and under-payment of stamp duty because the arrangement is patently a sham to avoid tax.

Indeed, many couples have been led to believe that it is prudent to hold their first property in the ratio of 99 to 1 so that they can save even more when they decouple later. This is because when it's time for the 99-per-cent owner to take over the 1 per cent stake, he or she only has to pay stamp duty on that tiny amount.