Court Tells Developer Pay Up Extra $286,000

Source : The New Paper, October 21, 2007

EN BLOC TACTIC Developer pays stamp duty on each individual unit to save money

GOVT BODY SAYS: Sorry, pay stamp duty based on en bloc price and not per unit basis

THIS developer thought of a clever tactic that could save it nearly $300,000 in stamp duties in an en bloc buy.

When challenged, it went to court, but lost and ended up having to pay the entire amount, plus costs.

UOL Development (Novena) Pte Ltd paid $61 million for 53 units in Golden Towers and Eu Hock Apartments on Minbu Road in 2005.

It then decided to enter into a contract with each homeowner individually.

Stamp duty is charged at 1 per cent for the first $180,000 of the purchase price, 2 per cent for the next $180,000, and 3 per cent for the balance.

By not treating the deal as one transaction with a group, the company figured it could get the lower rates to apply 53 times over, and pay $286,200 less in stamp duties, court documents showed.

The Commissioner of Stamp Duties - who is under the Inland Revenue Authority of Singapore - took the stand that the en bloc sale was a single transaction, and so the company could enjoy the lower rates only once.

UOL Development then took its case to the High Court.

The court heard that the home owners had agreed to the collective sale as their units would fetch a higher price than if they had sold their properties individually.

When UOL Development was told that its offer of $61m had been accepted, it asked the lawyers representing the home owners, Wee Ramayah & Partners, for 53 separate letters of acceptance.

UOL Development then presented the 53 contracts - one for each unit - for stamping. Based on this, it said the stamp duty payable should be assessed on a per unit basis instead of collectively.

But Mr Liu Hern Kuan, who represented the Commissioner of Stamp Duties, pointed out that UOL Development's affiliated companies had previously acquired properties on an en bloc basis.

The properties include Eng Cheong Towers, Maryland Park and Bo Bo Tan Gardens and these affiliated companies had paid stamp duty based on the en bloc price.

On Monday, Justice Tan Lee Meng ruled that UOL Development had to pay stamp duty based on the en bloc price, and not on a per unit basis.

COLLECTIVE ENTITY

He pointed out that in the tender, the home owners had indicated that they wanted to sell their properties as a collective entity.

And when UOL Development made an offer to purchase, it had also not indicated that it was buying the 53 units separately.

Said Justice Tan: 'Apart from the fact that there is no reference to 53 separate contracts in UOL's offer to purchase the properties, UOL didn't assert that there was any written evidence to support its claim that it had purchased the properties on the basis of 53 separate contracts.'

He also said that UOL Development's move to ask for 53 separate contracts was for the sole purpose of lowering the stamp duty payable.

'The plan for 53 separate contracts had no sound commercial basis and was so contrived that it was clearly intended to reduce or avoid tax liabilities,' said Justice Tan.