IRAS Stand on Decoupling in 2025 - Critical Advise Moving Forward with 4-Point Plan
In 2025, a recent High Court case from June 2025, Jake v Millie, between two Singaporean owners has thrown a huge spotlight on the risks of this strategy. Link to article here. This is a must-know for every property owners.
The Story in a Nutshell: What Happened?
The Setup: A couple, Jake and Millie, bought a condo together. On paper, it was a 99/1 split, with Millie owning 99% and Jake owning 1%.
The Money: But here’s the twist – Jake paid for most of the property, far more than his 1% share. The main reason for the 99/1 split was to make Millie feel secure in the relationship as she was worried Jake would cheat on her.
The Breakup: The couple broke up. Millie claimed she owned 99% of the property as per the legal documents. Jake argued that since he paid for most of it, he should own most of it.
The Court’s Decision: The court sided with Jake. They looked past the 99/1 paper title and focused on who actually paid for the property. The judge decided that Millie was only holding a large portion of the property “in trust” for Jake. In the end, Jake was declared the true owner of over half the property (54.22%), not just his 1% share.
The Illegality: However the court also highlighted that the couple’s intended future decoupling and intention to pay stamp duty on only 1% share value constituted an illegal purpose being a breach of section 4 of the Stamp Duties Act.
Why This Case may be a Game-Changer for You.
This isn’t just a relationship drama; it has three major implications for all property transactions involving a 99/1 split.
1. The Paper Title Isn’t Everything
Firstly, the names and percentages on the title deed are not the final say. The law also cares about the financial reality and parties intentions behind the deal. If someone pays for 50% of a property, the court can decide they own 50% of it, even if the paper says they only own 1%. This is called a “resulting trust.”
2. The “Decoupling” Plan Can Lead to Serious Trouble with IRAS
We all know the “decoupling” plan: the 1% owner sells their share to the 99% owner, allowing them to buy a second property as a “first-time” buyer without ABSD.
This case exposes the danger. When the 1% owner sells their share, stamp duty is paid on the value of that 1%. But if they truly own 50% (because they paid for 50%), then they are under-declaring the value of their share to IRAS. The court made it clear that this is a form of unlawful understamping or false declaration to IRAS. IRAS has the power to investigate these deals, and the penalties can be severe.
The new case shows that when decoupling, it’s important that the stamp duty paid reflects the true ownership arrangement. If financial contributions don’t align with the 1% legal share, paying stamp duty on only the 1% value can create issues. To ensure everything is handled correctly, it is crucial for clients to seek specific legal advice.
3. The “ABSD loophole” is under the microscope.
The government and the courts are aware of these schemes. While the 99/1 split isn’t illegal by itself, using it with the sole intention of avoiding tax is a red flag. If it’s clear that a deal was structured just to get around ABSD, IRAS can disregard the arrangement and charge the full ABSD, plus a potential 50% surcharge.
Special Section: What if You Already Own a 99/1 Property and Want to Decouple Now
For owners who are in this situation, the stakes are higher. Here’s a step-by-step guide.
1. You MUST Re-evaluate Your True Ownership Share
The starting point is to figure out the real beneficial ownership. This isn’t about the 99/1 on paper; it’s about the money trail.
Action: Clients need to dig through all their financial records – bank statements, CPF payments, loan agreements—to calculate the exact percentage each person contributed to the property. This is a factor the Court may look at in determining their true share and ascertaining parties’ intentions.
2. Stamp Duty Must Be Paid on the TRUE Share
If the review shows the 1% owner actually funded, say, 40% of the property, then their beneficial share is 40%.
Action: When decoupling, stamp duty must be paid on the value of the 40% beneficial share being transferred, not the 1% legal share. Paying on 1% is understamping and a breach of the law. This can lead to paying the shortfall in tax plus heavy penalties.
3. The Original Purchase Can Still Be Audited by IRAS
Fixing the stamp duty now for the decoupling doesn’t erase all risks.
Action: IRAS can still investigate the original 99/1 purchase. If IRAS decides it was a scheme to avoid ABSD from the start, they can re-assess the tax for the initial purchase and impose a surcharge of up to 50%. There is no time limit for this.
The Critical Advice Moving Forward: A 4-Point Plan
Consider IRAS Adjudication First:
Before proceeding with the decoupling, clients can voluntarily seek adjudication from IRAS. This involves presenting your case to IRAS, who will then determine the correct amount of stamp duty to be paid. This is a proactive way to gain certainty and avoid future penalties for understamping.
Get Professional Help:
You must get independent legal advice to formalize the beneficial ownership and tax advice to ensure you are fully compliant, especially when preparing for adjudication.
Document Everything:
The reasons for the original split and the calculations for the true beneficial ownership must be well-documented. This is your defence if challenged.
Accept the Risk:
Clients must understand that while you can take steps to decouple correctly now (including adjudication), there is a lingering risk that the original transaction could be flagged by IRAS as a tax avoidance scheme.
My Personal Thoughts
The point made by the courts is what is the reality behind the transaction. The real funder might be looked at as the real owner unless there is some explanation.
But I would just say in case everyone starts to feel very alarmed, it is unlikely for IRAS to audit every case. As too many permutations and underlying interests etc.
However, it’s a reminder that something that is “tax saving” might not work. And not to advise it as something that will save them money.
My best advise is if there is a dispute the court or IRAS will probe into the “reality “ behind the transaction, try to ensure there is documentation to explain and prove the reality behind the transaction.
Disclaimer: This write-up is for general informational purposes only and does not constitute legal advice. The legal implications for each property transaction depend on its specific facts. You should always seek independent legal advice for their particular situation.