27 June 2011
This e-Tax Guide sets out the details of the mergers and acquisitions (“M&A”)
allowance and stamp duty relief scheme (collectively, the “M&A scheme”) introduced in Budget 2010.
- M&A Allowance
Under the scheme, subject to conditions, a company (“acquiring company”) that acquires the ordinary sharesof another company (“target company”) during the period 1 April 2010 to 31 March 2015 (both dates inclusive) is granted an M&A allowance, equal to 5% of the value of the acquisition.
An acquiring company may acquire the ordinary shares of a target company either directly or through a wholly-owned subsidiary that is incorporated for the primary purpose of acquiring and holding shares in other companies (“acquiring subsidiary”). In
both situations, the M&A allowance is granted only to the acquiring company.
The maximum amount of M&A allowance granted to an acquiring company is $5 million for each year of assessment (“YA”) for all qualifying share acquisitions executed in the basis period for that YA (i.e. 5% of the purchase consideration of qualifying share acquisitions aggregating up to $100 million).
The M&A allowance on the purchase consideration (including any contingent consideration) incurred for any qualifying share acquisition is allowed over 5 years on a straight-line basis (“5-year write-down period”) and cannot be deferred.
The scheme is limited to qualifying share acquisitions only. It is not applicable to a company which acquires the business assets of another company (including as a going concern).
- Stamp duty relief
Under the scheme, subject to conditions, stamp duty relief is granted on any contract or
agreement for sale of equitable interest in ordinary shares or on any transfer documents for the acquisition of the ordinary shares under an M&A deal. The instrument must be executed during the period 1 April 2010 to 31 March 2015 (both dates inclusive) to be eligible for the relief.
The acquiring company may acquire the ordinary shares of the target company directly or through an acquiring subsidiary. The amount of stamp duty relief which is granted to the acquiring company only is capped at $200,000 for each financial year.
Where both stamp duty relief and M&A allowance are claimed on the same qualifying
share transaction, the FY or elected 12-month period for the purpose of stamp duty relief must be identical to the basis period or elected 12-month period for the purpose of claiming M&A allowance.
For full details, please refer to http://www.iras.gov.sg/irasHome/page.aspx?id=902 (Ref 2011/IT/2).