(July 13, 2015)

On July 13, 2015 the Inland Revenue Authority of Singapore (hereafter; IRAS) issued the third edition of its e-Tax Guide: “Income Tax and Stamp Duty: Mergers and Acquisitions Scheme”. According to the Guide it sets out the details of the mergers and acquisitions scheme (“M&A scheme”) which is relevant to Singapore companies.

In the paragraph “At a glance” the Guide gives the following summary: 

·        The M&A scheme seeks to encourage Singapore companies, especially small and medium enterprises (“SMEs”), to grow through strategic acquisitions. Under the scheme, a Singapore company (“acquiring company”) which makes a qualifying acquisition of the ordinary shares of another company (“target company”) may, subject to conditions, enjoy the following tax benefits: 

(a)   An M&A allowance on the purchase consideration;

(b)   A stamp duty relief on the agreement for the sale of equitable interest in ordinary shares or instrument of transfer executed in connection with the qualifying share acquisition; and

(c)   A double tax deduction (“DTD”) on transaction costs incurred in respect of the qualifying share acquisition.

·        The M&A scheme is not intended to apply to:

(a)   an internal restructure/ reorganisation of companies undertaken within a corporate group except where such a restructure/ reorganisation results in the group owning a higher proportion of the ordinary shares in a target company after the event;

(b)   the setting up of new (subsidiary) companies within a corporate group to carry on business activities;

(c)   the acquisition of ordinary shares which form part of the acquiring company’s trading stocks.

The Guide starts with giving a glossary and subsequently discusses a.o. the following subjects:

·        Overview of M&A scheme

·        Qualifying share acquisitions

·        Qualifying conditions

·        Determination of M&A allowance and stamp duty relief

·        Manner of offset of M&A allowance and DTD on transaction costs

·        Group relief, carry-back and carry-forward of unabsorbed M&A allowance and DTD on transaction costs

·        Events resulting in forfeiture or reduction in M&A allowance and/ or stamp duty relief

·        Abusive practices

·        Registered business trust

·        Administrative matters

·        Contact information

·        Updates and amendments

The Guide furthermore contains the following annexes:

·        Annex A – Example on computation of M&A allowance

·        Annex B – Example on application of stamp duty relief

·        Annex C – FAQs relating to the condition for representation on board of directors of the target company

·        Annex D – Examples on computation of M&A allowance and application of stamp duty relief in a step-acquisition

·        Annex E – Example on how M&A allowance is prorated in event of divestment

·        Annex F – Summary of effect on M&A allowance and stamp duty relief for an acquiring company due to changes in shareholding in a target company, in its shareholders or business operations and non-compliance of conditions under M&A scheme

·        Annex G – Modification of qualifying conditions in respect of an acquiring Registered Business Trust (“RBT”)

Click here to be forwarded to IRAS e-Tax Guide: “Income Tax and Stamp Duty: Mergers and Acquisitions Scheme” as published on the website of the Inland Revenue Authority of Singapore.

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