SINGAPORE – A mother and son pair formulated a plan to try and abuse a loophole to avoid paying a hefty sum in property tax.
When auditors from the tax office came knocking, the pair doubled down on their lies by providing false information to the officers.
They also deleted messages exchanged on their smartphones that contained their plan from the outset, which was to avoid paying the additional buyer’s stamp duty (ABSD).
On Feb 28, the mother, Ng Chiew Yen, 56, and her son, Keith Tan Kai Wen, 26, each pleaded guilty to two charges of providing false and misleading information to the taxman.
They were both sentenced to two weeks’ jail.
This is the first prosecution involving an Inland Revenue Authority of Singapore (Iras) audit into a “99-to-1” purchase arrangement.
This scheme has been used by some property buyers to reduce the rightful ABSD payable on the purchase of a residential property.
It enables those who already own property to reduce or avoid paying ABSD, while still becoming an additional property’s co-owner and a co-applicant for a loan to finance the purchase.
The arrangement typically involves an individual who does not own any property initially buying a residential property in their name and, within a very short period of time, selling a small share of the property, such as 1 per cent, to another individual who owns property.
Mr Goh Yong Ngee, who acts as a prosecutor for Iras, said Tan had purchased a condominium unit in 49 Canberra Drive in his sole name on Sept 24, 2021 for $1,113,000.
He had done this despite being unemployed and therefore ineligible for a loan at the time.
Investigations had revealed that the pair knew Ng had to be a joint buyer in order for a loan to be approved. They also knew they would be liable for the ABSD of the full property purchase price if they had bought the property jointly from the onset.
As Tan did not own another residential property at the time of his purchase, he did not have to pay the ABSD for the condominium.
He subsequently sold a 1 per cent share of the property to his mother for $11,130, on Sept 27, 2021.
As Ng owned another property, she paid ABSD on her share of the purchase.
During an Iras audit, Tan said he had made a hasty decision to purchase the property, with the understanding that his family would support him financially.
He added that his mother offered to take a loan for him when he realised his family was unable to finance his property, leading to his decision to add her as a joint owner.
On May 22, 2023, Iras officers followed up by asking Tan for him and his mother’s correspondence with the bank from which they had taken a loan, the property agent and any other relevant parties.
Iras sent two warnings to Tan to provide the required correspondence, one on May 29, 2023, and one on June 1 that same year. Another e-mail was sent on June 18, 2023.
On June 23, 2023, Tan attached a copy of his mother’s correspondence with her banker on WhatsApp and sent it to the Iras officers.
Further investigations revealed he had deleted 109 messages that contradicted their positions, with some clearly outlining their plan to skirt taxes through the “99-to-1” arrangement.
On June 30, 2023, the Iras commissioner assessed the pair to owe ABSD of $130,779 and imposed a surcharge of $65,389.
Mr Goh said Ng and Tan came clean only on Jan 22, 2024, when they realised the game was up.
The pair’s defence lawyer, Mr Amolat Singh, said they had not intended to defraud the taxman, but had rather stumbled into a minefield.
He added that they are not the right candidates to be made an example of, as this is the first such prosecution that has happened in the nation’s courts.
In response, the prosecution said the pair had not merely stumbled into the minefield.
“In fact, they both tried to navigate and circumvent the minefield. This happened despite the multiple warnings given to them by Iras officers,” said Mr Goh.
On May 7, 2024, Finance Minister Lawrence Wong said Iras will claw back about $60 million in ABSD and surcharges after uncovering 166 cases of private home purchases that involved the use of the “99-to-1” scheme.
A reward based on 15 per cent of the tax recovered, capped at $100,000, will be given to informants if information or documents provided lead to a recovery of tax that would have otherwise been lost.
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