Singapore Revises M&A Tax Allowances

May 20, 2014 Posted by ASEAN Briefing Reading Time: 2 minutes

SINGAPORE – According to the revised e-Tax Guide released by the Inland Revenue Authority of Singapore (IRAS) today, changes have been made to Singapore’s mergers and acquisitions (M&A) allowances, stamp duty relief and double tax deduction schemes, which were introduced in the Budget 2010 and enhanced in the Budget 2012.

Under the new M&A scheme, when a company that is a tax resident and incorporated in Singapore acquires a controlling ordinary stake in another company, the acquiring company will be given an M&A allowance equal to 5 percent of the value of the acquisition. The maximum amount of M&A allowance for the acquiring company is SG$5 million (US$4 million) per year for all qualifying share acquisitions executed in that year. The scheme will apply to M&A transactions carried out from April 1, 2010 through March 31, 2015.

Under the revised M&A allowance scheme, the IRAS also grants stamp duty relief on any contract or agreement for the sale of an equitable interest in ordinary shares, as well as any transfer documents for the acquisition of the ordinary shares. In order to be eligible for this relief, the tax instrument must have been used from April 1, 2010 to March 31, 2015. The maximum amount of stamp duty granted to the acquiring company is set at SG$200,000 (US$160,000) per financial year.

According to the revised e-Tax Guide, the double tax deduction scheme for transaction costs incurred on qualifying share acquisitions, introduced in Budget 2012, will go into effect and cover transactions from February 17, 2012 to March 31, 2015. A 200 percent tax allowance will be granted on all transaction costs, with a maximum deduction of SG$100,000 (approx. US$80,000) in each year of assessment.

Transaction costs shall include:

Legal fees;
Accounting fees;
Tax advisory fees;
Valuation fees; and
Other professional fees incurred during the acquisition of qualifying shares.

Any transaction costs incurred before February 17, 2012 will be ineligible for the tax relief benefits.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email singapore@dezshira.com or visit www.dezshira.com.

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