Special Purpose Vehicles (SPVs)

On 24th January 2013, the Business Times (BT) published an article on the increasing appeal of property SPVs. The article cited advertisements by Savills and Jones Lang LaSalle marketing properties that can be bought through an SPV. While buying shares in an SPV that owns a property is not a new concept, the latest appeal arises from the avoidance of the hefty ABSD imposed recently.

In light of the article, the Inland Revenue Authority of Singapore (IRAS) responded in a letter that emphasised “IRAS audits stamp duty transactions to detect transactions that are conducted for tax avoidance purposes”. The message was published in a follow-up article in BT on 26th January.

Under S33A of the Stamp Duties Act (Cap 312), the Commissioner of Stamp Duties can disregard any stamp duty arrangement if he is satisfied that the arrangement was to alter, relieve, reduce or avoid the stamp duty liability.

Annual Value of rental

In HSBC Institutional Trust Services (Singapore) Ltd v Chief Assessor [2013] SGCA 4, the Court of Appeal (CA) dismissed the appeal and held that the depreciation component in the rent is included in “determining the ‘annual value’ for the purposes of property tax assessment.”

In the judgement delivered by the Court, two issues – (1) the proper test for exclusion, (2) application of the test on the depreciation component – were raised and considered sequentially to arrive at the decision.

Before this landmark CA ruling, IRAS faced close to 4,000 similar challenges on its depreciation expense policy. This ruling clears the vagueness surrounding the policy and should be noted by all landlords.