IRAS issues updated guide to the Mergers and Acquisitions Scheme

On By taxsgIn Corporate Tax, Latest Tax News

8 July 2016

On 30 June 2016, the Inland Revenue Authority of Singapore (IRAS) issued the fourth edition of the e-Tax Guide, “Income Tax and Stamp Duty: Mergers and Acquisitions Scheme”.

This e-Tax Guide sets out the details of the Mergers and Acquisitions scheme (M&A scheme) whereby acquisitions of ordinary shares of a target company by a qualifying Singapore company between 1 April 2010 to 31 March 2020, may, subject to conditions, be granted the following tax benefits:

  • An M&A allowance on the purchase consideration
  • 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
  • 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:

  • Internal restructures/reorganisations 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.
  • Setting up of new (subsidiary) companies within a corporate group to carry on business activities
  • Acquisition of ordinary shares which form part of the acquiring company’s trading stocks.

In this edition, the e-tax Guide has been updated to reflect the increase in the cap on value of qualifying acquisitions from $20 mil to $40 mil as announced in Budget 2016, i.e.

  • Tax allowance of 25% will be granted for up to $40 mil of consideration paid for qualifying M&A deals per YA, and
  • Stamp duty relief will be granted for up to $40 mil of consideration paid for qualifying M&A deals per financial year.

The above changes will take effect for qualifying M&A deals made from 1 April 2016 to 31 March 2020. There is no change to the cap imposed on the DTD for qualifying transaction costs.

The second edition was published on 31 March 2015.

For further details, please refer to the IRAS’s website.

Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website. Visit http://www.iras.gov.sg for more information.