Decoupling vs Gift of Property in Singapore: What Is the Difference?
When a property is jointly owned, one owner may wish to transfer his or her share to the other owner. This commonly arises between spouses who want to restructure their property ownership, as part of estate planning, or when one spouse intends to purchase another property.
Two terms that are often used are “decoupling” and “gift”. Although both can result in one owner becoming the sole owner of the property, they are not the same thing.
What Is Decoupling?
“Decoupling” is a commonly used term rather than a specific legal form of transfer. It generally refers to an arrangement where one co-owner transfers his or her share of a property to the other co-owner, leaving one person as the sole owner.
For example:
Husband and Wife jointly own a private condominium in equal shares.
Husband transfers his 50% share to Wife.
Wife becomes the sole owner of the condominium.
Husband no longer owns an interest in that property.
One reason couples consider decoupling is so that the outgoing spouse no longer has an ownership interest in the existing property before purchasing another residential property.
However, the transfer itself may attract Buyer's Stamp Duty (“BSD”) and, depending on the receiving owner's property profile, Additional Buyer's Stamp Duty (“ABSD”). IRAS treats the acquisition of an additional share in a residential property as an acquisition of property for stamp duty purposes.
Accordingly, decoupling should not be viewed simply as “removing a name” from the property. There is an actual transfer of a legal and beneficial interest in the property.
What Is a Gift of Property?
A gift occurs when an owner transfers his or her interest in the property to another person without receiving monetary consideration in return.
For example:
Husband and Wife each own 50% of a condominium.
Husband transfers his 50% share to Wife as a gift.
Wife does not pay Husband for his share.
Wife becomes the sole owner.
The fact that no money changes hands does not mean that the transfer is free from stamp duty.
IRAS expressly states that where property is transferred as a gift, stamp duty is payable based on the market value of the property transferred.
Therefore, describing a transaction as a “gift” does not by itself eliminate BSD or ABSD.
The Main Difference Between Decoupling and a Gift
The easiest way to understand the distinction is this:
Decoupling describes the objective or result of the transaction. A gift describes the basis on which the transfer is made.
A couple may “decouple” their property ownership by one spouse:
selling his or her share to the other spouse for consideration; or
gifting his or her share to the other spouse without consideration.
Accordingly, a gift can itself be one method of achieving a decoupling.
The important legal and tax consequences therefore depend less on what the parties call the transaction and more on how the ownership interest is actually transferred.
Example 1: Decoupling by Sale
Assume Husband and Wife own a condominium worth $2 million, with each holding a 50% share.
Husband sells his 50% share to Wife.
The value of the transferred share is approximately $1 million.
Wife acquires Husband's interest and becomes the sole owner. BSD is generally calculated on the purchase price or market value of the interest acquired, whichever is higher.
Whether ABSD is payable will depend on matters including Wife's citizenship and the number of residential properties she owns at the time she acquires Husband's share. IRAS treats partial ownership as property ownership when determining an individual's residential property count.
Example 2: Decoupling by Gift
Using the same example, Husband instead says:
“I do not want Wife to pay me anything. I will simply give her my 50% share.”
Although Wife pays Husband $0, this does not mean the stamp duty value is $0.
For stamp duty purposes, the transferred share is generally assessed based on its market value. IRAS specifically confirms that a gift of property remains subject to stamp duty based on market value.
Wife therefore cannot avoid stamp duty merely because Husband describes the transfer as a gift.
What About ABSD?
This is one of the most important considerations.
When one spouse acquires the other spouse's share, the receiving spouse's property ownership profile must be considered.
For example, IRAS gives the example of a Singapore Citizen already owning two residential properties, one jointly with her husband. If her husband transfers his half-share of their jointly owned property to her, the acquisition is treated as an acquisition of an additional residential property interest and may attract ABSD, subject to any applicable remission.
The precise ABSD position therefore needs to be checked before the transfer is signed, rather than after completion.
This applies whether the share is transferred:
for money;
at a discounted price; or
entirely as a gift.
Does a Gift Avoid Buyer's Stamp Duty?
No.
BSD is payable on documents relating to the transfer or sale and purchase of Singapore property. It is generally calculated on the consideration or market value, whichever is higher.
If a $1 million share of a property is gifted for no payment, the relevant stamp duty value does not automatically become $0 simply because there is no purchase price.
What About Seller's Stamp Duty?
Seller's Stamp Duty (“SSD”) should also be considered, particularly where the property or the relevant share was acquired within the applicable SSD holding period.
A gift can constitute a disposal for SSD purposes.
IRAS gives an example where a wife gifted her half-share of a private residential property to her husband. When the husband subsequently sold the property within the applicable holding period for the newly acquired half-share, SSD was payable on that half-share.
This is another reason why a gift should not be regarded as a purely administrative transfer.
What Happens to the Mortgage?
Where the property is subject to an outstanding housing loan, the loan cannot simply be ignored.
If one spouse becomes the sole owner, that spouse will generally need to be able to take responsibility for the financing of the property. Depending on the circumstances, this may involve:
refinancing the existing housing loan;
obtaining the lender's consent;
redeeming the existing loan and taking a new loan; or
satisfying the bank that the remaining owner meets its lending requirements.
A property transfer and a mortgage are separate legal matters. Removing a person's ownership interest does not automatically release that person from his or her obligations under an existing housing loan.
What Happens to CPF Used for the Property?
CPF is another important consideration.
CPF Board states that when an owner sells or transfers his or her share of a property, the CPF savings used for that property together with the applicable accrued interest generally have to be refunded to the CPF account, subject to the applicable CPF rules.
Accordingly, before deciding whether a transfer should be structured as a sale or gift, the parties should establish:
how much CPF each owner has used;
the accrued interest;
whether there is sufficient consideration or financing to make the required refund; and
how the remaining owner will fund the transaction.
A gift does not automatically mean that CPF refund requirements disappear. Both parties need to refund to their CPF accounts including accrued interest.
Is Decoupling the Same for HDB Flats?
No. Decoupling is not allowed for HDB flats unless there is a divorce or death of a co-owner.
What If the Transfer Takes Place Because of a Divorce?
Transfers pursuant to divorce are a separate category and should not be confused with ordinary decoupling or gifting between spouses.
Where a transfer results from matrimonial proceedings and satisfies the prescribed conditions, BSD, ABSD and SSD remission may be available. IRAS provides specifically for transfers made pursuant to a court order for the division of matrimonial assets or in consequence of divorce proceedings.
CPF treatment may also differ. CPF Board states that where the Court orders a transfer of an ex-spouse's property share, the Court order may provide for full, partial or no CPF refund, subject to the applicable CPF requirements.
This is significantly different from an ordinary voluntary sale or gift between spouses.
Decoupling vs Gift: Quick Comparison
| Issue | Decoupling by Sale | Gift of Share |
|---|---|---|
| Money paid to outgoing owner | Yes. The outgoing owner sells his or her share to the remaining owner. | No. The outgoing owner transfers his or her share without receiving consideration. |
| Ownership after transfer | The remaining owner becomes the sole owner. | The remaining owner becomes the sole owner. |
| CPF refund | Compulsory. The outgoing owner must make the required CPF refund in respect of the share being transferred. | Compulsory. Both parties must refund the CPF monies used for the property to their respective CPF accounts, together with the applicable accrued interest. |
| Housing loan | Financing may be available, subject to the bank's lending requirements and the remaining owner's eligibility. | No. A housing loan cannot be used for the gift transfer. |
| Buyer's Stamp Duty (BSD) | Generally applicable to the share acquired. | Generally applicable based on the market value of the share transferred. |
| Additional Buyer's Stamp Duty (ABSD) | Depends on the receiving owner's property profile and any applicable remission. | May apply based on the receiving owner's property profile. Gifting the share does not by itself avoid ABSD. |
| Seller's Stamp Duty (SSD) | May apply if the relevant share is disposed of within the applicable holding period. | May also apply even though the share is transferred as a gift. |
| Practical funding requirement | The remaining owner may use available cash and, where eligible, financing to complete the purchase. | The parties must have sufficient funds to complete the required CPF refunds without relying on a housing loan for the gift transfer. |
Which Is Better: Decoupling by Sale or Gift?
There is no universally better option.
A sale may be appropriate where the outgoing owner is intended to receive his or her share of the property's value.
A gift may be appropriate where the outgoing owner genuinely wishes to transfer the property without receiving compensation.
However, parties should not choose a gift merely because they believe it avoids tax. It generally does not. IRAS looks at the market value of the interest transferred for stamp duty purposes even where no money changes hands.
The parties should instead consider the entire transaction, including:
the property's market value;
each party's ownership share;
outstanding mortgage;
CPF used by each owner;
BSD and ABSD;
potential SSD;
refinancing capacity; and
what each party intends to do with the property after the transfer.
Conclusion
Decoupling and gifting are often spoken about as though they are two entirely different property transactions. Strictly speaking, decoupling refers to separating the parties' ownership of a jointly owned property, while a gift is one possible way of carrying out that transfer. Whether the outgoing owner sells or gifts his or her share, there can still be significant stamp duty, CPF, financing and legal consequences.
Before transferring a share of a property, it is therefore important to determine the purpose of the transaction and calculate the consequences before the documents are signed.
YY Lee & Associates LLC advises on property transfers arising from divorce and matrimonial proceedings, including issues concerning CPF refunds, ownership transfers and the drafting of appropriate court orders. If you require advice on how your property should be dealt with following a divorce, please contact us to discuss your circumstances.