IRAS consultation paper on mergers and acquisitions scheme

Practical Law UK Legal Update 5-502-9232 (Approx. 3 pages)

IRAS consultation paper on mergers and acquisitions scheme

by Allen & Gledhill LLP

Published on 29 Jul 2010 • Singapore

This article is part of the PLC Global Finance July e-mail update for Singapore.

It was announced in Budget 2010 that a new Merger and Acquisition Allowance (M&A Allowance) and stamp duty remission will be introduced to help defray the costs of acquiring companies. Between 2 June 2010 and 23 June 2010, the Inland Revenue Authority of Singapore (IRAS) conducted a public consultation and issued a consultation paper entitled "Mergers and Acquisitions Scheme" to seek feedback from the public on the proposed features of the scheme which aims to implement these tax incentives (M&A Scheme). Key proposals in the consultation are outlined here.

It was announced in Budget 2010 that a new Merger and Acquisition Allowance (M&A Allowance) and stamp duty remission will be introduced to help defray the costs of acquiring companies.

Between 2 June 2010 and 23 June 2010, the Inland Revenue Authority of Singapore (IRAS) conducted a public consultation and issued a consultation paper entitled "Mergers and Acquisitions Scheme" to seek feedback from the public on the proposed features of the scheme which aims to implement these tax incentives (M&A Scheme).

Qualifying conditions of M&A Scheme

Under the M&A Scheme, an M&A Allowance is granted for the acquisition of ordinary shares in a company and relief from stamp duty is also available for the acquisition (where the ordinary shares are unlisted). The M&A Scheme applies to acquisitions made between 1 April 2010 and 31 March 2015 (both dates inclusive).

The IRAS consultation paper sets out the conditions that must be satisfied by the acquiring company, the target company and the percentage of the ordinary shares in the target company that must have been acquired by the acquiring company to qualify under the M&A Scheme.

Amount of M&A Allowance

The amount of the M&A Allowance is 5% of the cash consideration paid for the acquisition and/or the value of any of the acquiring company's shares issued as consideration subject to a maximum amount of S$5 million for each year of assessment of the acquiring company.

Stamp duty relief

The maximum amount of stamp duty relief available to an acquiring company under the M&A Scheme is S$200,000 per financial year.

Cessation of M&A Allowance or claw-back of stamp duty relief

Any M&A Allowance granted but not yet absorbed may cease to be available and any stamp duty relief may be clawed-back if the acquiring company no longer fulfils any of the qualifying conditions of the M&A Scheme within a five-year period (in relation to the stamp duty relief, a two-year period), or when there is a substantial change in the shareholders of the acquiring company during this period.

Reference material

The IRAS consultation paper, "Mergers and Acquisitions Scheme", is posted on the IRAS website.

IRAS consultation paper on mergers and acquisitions scheme | Practical Law