Estate Planning for Investors: Tax Efficient Structures & Overseas Properties

Eugenia Liew
Estate Planning for Investors: Tax Efficient Structures & Overseas Properties
Property taxes and duties come in many sizes and forms. If you have or are planning to invest in a property, be it residential, non-residential or overseas properties, one issue that you should definitely consider is how to make your purchases more tax efficient.
“When you buy a property, the questions to ask are ‘What is your purpose of buying this property? Are you buying it to live in it or are you buying it for investment? Are you hoping to sell it to make money from it or are you hoping to collect rent from it? If you’re holding on to it for a while, what happens when you are gone?'" Edmund Leow, senior partner and head of the tax and trust, estates and wealth preservation practice at Dentons Rodyk & Davidson LLP says. “All these questions will determine the best structure to use to buy the property.”
For this guide, we’ve partnered with legacy planning marketplace, Immortalize, to explore the tax efficient structures as well as share tips on estate planning for your property investments.

First and Foremost, Is There Estate and Inheritance Tax in Singapore?

There are no estate duties in Singapore. But when it comes to buying properties overseas, inheritance tax and the ability to inherit the property are issues that one should consider.
For example, if you are buying a property in New York, you need to consider U.S. estate taxes and upon your death, your estate you may lose up to 40% of it, according to Leow.

Tax Optimization Tools to Consider

Some of the common tools that people use are company, partnership, or trust structures.
“Sometimes it requires a more elaborate structure which could be a trust which in turn holds the company which in turn holds the property, or it could be a trust and a company in different jurisdictions,” Leow added. “There are many ways, but it really is case-by-case.”

Should You Use A Company to Buy Property in Singapore?

The answer depends on what kind of property it is.
“If you want to buy a residential property, it’s cheaper to buy it as an individual compared to using a company as the maximum stamp duty payable for individuals is still lower than for companies,” according to Lee Soo Chye, Partner at Wee Swee Teow LLP. “But for commercial and non-residential property, it might be more tax efficient to consider using a corporate vehicle/business because of the GST element.”
Lee explains with an example:
“When I want to buy a non-residential property from a developer, I (almost invariably) have to pay GST on that purchase. If I purchase that property using a GST-registered business (which can be a company), the GST paid to the developer can be offset against the GST which is charged and collected by my GST-registered business for goods and services which I may provide in my business.
If the GST collected is less than the GST paid by my business, my business can claim a refund from the tax department for the difference. If my business is not GST-registered, it cannot receive any such refund. This can represent a tax leakage for the purchaser.”

What About Properties Overseas?

Again, it depends. What works for one case may not work for others.
“If someone is buying a property in the U.S., a company or partnership structure may be useful to avoid estate tax,” Edmund Leow from Dentons Rodyk & Davidson LLP said. “Each country is different, each has its own rules, and the rules can change. For example, in the U.K., we used to advise people to buy London properties using a company. But after the rules changed, we asked our clients to get rid of the company.”
In the following section, we’ll explore estate planning issues related to owning properties in different countries.

Where Should You Draft Your Will?

If you have properties in different countries, you can either draw up a will for each country that you have properties in or have one will that covers all your assets. What you need to note is that different countries may have different requirements as to what’s considered a valid will.
For example, in Dubai, for a will to be valid, the will needs to be signed by a notary public, but in Singapore, you only need two witnesses that are not the beneficiaries or spouse of the beneficiaries, according to Chen Yiyang, associate at Tan Kim Seng & Partners.
“We always advise clients with multi-jurisdictional properties that if your properties are in a Commonwealth country, then it’s safe to draw up a Singapore will and include your foreign properties,” Chen said. “But if your properties are in countries such as the U.S. and Thailand, we highly advise them to go to draw up a will in the countries where the properties are located. This is because the validity of a will in civil law countries is different from common law countries.”
“When I hear from my clients that they like to buy properties overseas, for good measure, I always ensure a clause in the Singapore will to state that if they have a will that is drawn up after the Singapore will for their properties overseas, this will remains valid for the Singapore assets and will not be superseded by the foreign will,” Chen added.

Where to Get the Grant of Probate?

In Singapore, after someone passes away and before the title of the property could be transferred, the executor of a will has to first get a grant of probate (a kind of legal document) from the court.
Similar type of procedures applies in other countries and usually, you will either have to apply for a grant of probate in those countries or you can potentially “re-seal” the grant of probate obtained elsewhere (ie, have a local court recognize your foreign grant of probate).
“When somebody passes away, and the deceased has properties in Singapore, Australia, U.K., Hong Kong, and Malaysia, always obtain the Grant of Probate in Singapore first,” Chen from Tan Kim Seng & Partners says. “This is because the Singapore Courts will take the original will, inspect it and return it.”
“Whereas in most other Commonwealth countries, when a Grant of Probate is being obtained, the courts will keep the original will and when the executor comes to Singapore to obtain a Grant of Probate, there is no original will and a re-sealing of the foreign grant needs to be done,” Chen adds. “The filing fees for re-sealing are more expensive so always obtain the Grant of Probate in Singapore first to keep the costs low.”

Lasting Power of Attorney for Expats or International Property

In Singapore, it is highly recommended to do a Lasting Power of Attorney (“LPA”) indicating who should make decisions for your property and affairs should you lose mental capacity.
For expatriates or people with properties overseas, it is important to note that the LPA that you do in Singapore will not apply to your properties in other countries, according to Sarah-Mae Thomas, managing director at Sarah-Mae Thomas LLC.
“Unlike a will, where you can re-seal in Commonwealth countries, you need to get an LPA equivalent in every country that you have property in,” Thomas said. “For example, if you have property in Australia, you might need to get legal advice on whether you need to have an enduring power of attorney, and then in Singapore, the LPA”.
Different countries and jurisdictions will have different rules related to inheritance and estate execution, but differences can also arise for different religions within the same jurisdiction.

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This guide was written in collaboration with Immortalize, a legacy planning marketplace where you can find out more and compare lawyers and their rates and services.
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More FAQs About Investing in Property and Overseas Properties

An investment property is a property you use for profit, either through capital appreciation (i.e., selling for profit), or passive income through rentals.

In general, property is a popular and reliable investment vehicle. However, we cannot advise you on investment strategies. It’s best to speak to a licensed financial advisor who can better advise you based on your finances and current investment portfolio.

Yes, you can (subject to each countries’ relevant laws). Do note that if you own an overseas property, you cannot buy an HDB flat. You can, however, buy an overseas property if you own an HDB flat and it has crossed its Minimum Occupation Period.