Mother and Son First to Face Charges for Using the “99-to-1” Property Scheme

In September 2024, a significant case unfolded in Singapore’s property market when a mother and her son became the first individuals to be charged with lying to the Inland Revenue Authority of Singapore (IRAS) regarding a “99-to-1” property purchase arrangement. This legal case is notable as it highlights the government’s heightened scrutiny of property transactions designed to reduce tax liabilities through questionable means.

The son, 26-year-old Tan Kai Wen Keith, had purchased a condominium unit in his name before selling a 1% share to his mother, Ng Chiew Yen. IRAS suspects this transaction was structured deliberately to avoid paying the Additional Buyer’s Stamp Duty (ABSD), a tax levied on those purchasing additional properties. This method is seen as a growing tax avoidance issue, and the case against Tan and his mother is the first prosecution of its kind, making it a benchmark for future cases​

How the “99-to-1” Scheme Works

The “99-to-1” scheme refers to a property purchase arrangement where one buyer holds 99% ownership while another holds a mere 1%. (Read more about what is Decoupling and 99-1 Split? And, Why?). The tactic comes into play when individuals try to avoid ABSD, particularly on second property purchases. ABSD is a hefty tax in Singapore aimed at cooling the property market, especially for multiple-property owners. For instance, Singaporeans pay 20% ABSD on a second property, a substantial figure that increases to 30% for third and subsequent properties.

The scheme exploits a loophole where a person without prior property ownership buys 100% of a new property in their name. Shortly after the purchase, they transfer 1% of ownership to another party, often a family member who already owns property, thereby significantly reducing the ABSD liability for the second party. While it seems like a clever workaround, it becomes problematic when the intent behind the transaction is solely to avoid paying ABSD​

The Case at Hand

Tan Kai Wen Keith purchased the condominium at Canberra Drive, part of an upcoming development called The Watergardens at Canberra. IRAS suspects that shortly after the purchase, Tan sold a 1% share of the property to his mother to evade paying the full ABSD, which would have applied if they had bought the property jointly from the outset. IRAS’s audit into the transaction began in 2023, and it revealed that Tan had allegedly provided false and misleading information to justify the ownership structure. He reportedly claimed that he made a hasty decision to purchase the property with the understanding that his family would later support him financially, which IRAS found to be misleading​

This prosecution is significant as it sets a precedent for how IRAS will handle similar cases moving forward. The mother and son now face up to two years in jail, a fine of up to S$10,000, or both, under the Stamp Duties Act. More importantly, the case underscores the government’s determination to clamp down on tax avoidance, particularly as property prices continue to soar in Singapore​

The Rise of the “99-to-1” Scheme

While the “99-to-1” scheme has been around for years, it has garnered more attention recently due to the rising number of cases flagged by IRAS. In 2023, the tax authority began auditing these transactions as part of its ongoing effort to maintain fairness in the property market. By early 2024, IRAS had reviewed 187 such cases, and 166 were found to involve tax avoidance, resulting in the recovery of approximately S$60 million in unpaid ABSD​

Singapore’s property market has seen increasing regulation in recent years as the government seeks to cool a market that has experienced rapid price hikes. Cooling measures like ABSD were introduced to manage demand, especially from multiple-property owners, but schemes like “99-to-1” have emerged as a way for buyers to bypass these measures. As a result, authorities are stepping up efforts to investigate and audit suspicious transactions​.

What Makes the “99-to-1” Scheme So Risky?

The structure of the “99-to-1” scheme in itself isn’t illegal. It is merely a type of tenancy-in-common, where co-owners hold unequal shares in a property. However, when the intention is to reduce or avoid taxes, it falls into the category of tax avoidance. While tax avoidance isn’t illegal like tax evasion, it is still subject to penalties. In the case of the “99-to-1” scheme, IRAS has broad powers to reassess these transactions and impose penalties of up to 50% of the ABSD owed.

What makes the scheme particularly risky is the growing vigilance of the authorities. IRAS has made it clear that they will disregard transactions that appear to be artificial or contrived for tax avoidance purposes. As the mother and son case shows, the consequences can be severe. Those found guilty of providing misleading information to IRAS face jail time, hefty fines, and the possibility of paying back the ABSD, plus a 50% surcharge​.

IRAS’s Message to Buyers

In light of this case and others, IRAS has urged property buyers to voluntarily disclose any “99-to-1” arrangements they may have entered into. Buyers who voluntarily come forward can expect more favorable treatment from the tax authority, potentially avoiding the severe penalties associated with tax avoidance. This aligns with Singapore’s broader push for transparency and fairness in its property market.

The government’s stance is clear: while creative tax planning is allowed, crossing the line into tax avoidance, especially when it comes to cooling measures like ABSD, will not be tolerated. As Deputy Prime Minister and Finance Minister Lawrence Wong noted, the government’s focus is on ensuring a fair and sustainable property market, where everyone pays their fair share of taxes​.

Conclusion: The Risks of Playing the System

The case of Tan Kai Wen Keith and his mother serves as a cautionary tale for property buyers who may be tempted to exploit loopholes like the “99-to-1” scheme. While the structure itself is legal, using it to avoid taxes comes with significant risks, from financial penalties to legal repercussions.

As IRAS continues to audit and scrutinize property transactions, it’s becoming increasingly risky for buyers to try and game the system. Property buyers should seek professional advice and ensure that their transactions are above board, both legally and ethically. The government’s message is clear: when it comes to taxes, there’s no such thing as a free lunch.