Stamp Duty On Property Deals - Iras Has No General Power To Insist On 'Market Value'

Source : The Straits Times, Oct 9, 2007

THE Inland Revenue Authority of Singapore (Iras)'s Ms Chin Li Fen wrote that 'Property buyers are required to pay stamp duty based on the transacted price of the property or its market value, whichever is higher' ('Why stamp duty on property may be raised'; ST, Oct 6).

This statement is not quite a full reflection of the applicable law. Under the Stamp Duties Act, stamp duty on a sale is generally payable with reference to the amount or value of the consideration.

The Commissioner has power under Section 16 of the Stamp Duties Act to upstamp a sale to the open-market value where 'the Commissioner is of the opinion that by reason of the inadequacy of the sum paid as consideration or other circumstances... the transfer confers a substantial benefit on the person to whom the property is... transferred'.

This is not a general power to substitute what the Commissioner regards as market value simply because the Commissioner's view is that the market value is higher than what the parties transacted at. It is a power to be exercised sparingly in relation to bona fide sales.

This is made clear from what the Privy Council said in the leading case on this issue, Lap Shun Textiles Co Ltd v Collector of Stamp Revenue:

'Any stamp authority has to start from the point that valuation of much, if not most, property is a matter of judgment and is only possible within fairly broad limits, and that sound, if not the best, evidence of value is to be found in bona fide, arm's-length dealings. It is for this reason that when authorises the substitution for the agreed consideration of the 'real' value, it requires that a substantial benefit for the transferee should be found to exist. In the great majority of cases the normal procedure of... routine stamping according to the stated consideration will continue to be followed; such cases as the present will continue to be exceptional.'

In this regard, there is an essential difference between stamp duty and property tax. In the latter case, annual values are generally determined based on the Chief Valuer's opinion of such values; in the case of stamp duty, Iras' power to do so is much more limited.

Yeoh Lian Chuan