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Singapore Publishes Updated e-Tax Guide on Mergers and Acquisitions Scheme — Orbitax Tax News & Alerts

On 5 March 2021, the Inland Revenue Authority of Singapore (IRAS) published an updated e-Tax Guide Income Tax and Stamp Duty: Mergers and Acquisitions Scheme (Fifth Edition). The guide sets out the details of the mergers and acquisitions scheme (M&A scheme, which seeks to encourage Singapore companies, especially small and medium enterprises (SMEs), to grow through strategic acquisitions. Under the scheme, a Singapore company (acquiring company) that makes a qualifying acquisition of the ordinary shares of another company (target company) may, subject to conditions, enjoy the following tax benefits:

  • An M&A allowance on the purchase consideration;
  • 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
  • A double tax deduction (DTD) on transaction costs incurred in respect of the qualifying share acquisition (limited to acquisitions made during the period 17 Feb 2012 to 31 Dec 2025).

Originally introduced in Budget 2010 for a 5-year period, the M&A scheme was extended in Budget 2015, for 5 years until 31 March 2020, and was further extended until 31 December 2025 in Budget 2020.

Revisions are made in the fifth edition of the e-tax guide to reflect refinements to the M&A scheme as announced in Budget 2020, including that stamp duty relief has lapsed for instruments executed on or after 1 April 2020. Further, revisions are made to reflect that waivers will no longer be granted from the requirement that the ultimate holding company must be incorporated and tax resident in Singapore, which applies to acquisitions made on or after 1 April 2020. Previously, a waiver from the requirement could be granted by the relevant agency under the Headquarters Tax Incentive Programme (HQ Programme), on a case-by-case basis, for companies under the programme, subject to conditions.