SINGAPORE Law and Practice Contributed by: Terence Quek, Benjamin Cheong, Hoon Chi Tern and Favian Tan, Rajah & Tann Singapore
over an entire business with minimal impact on the business operations. As historical liabilities are being transferred, the warranties and indem- nities for a share sale should be heavily nego- tiated. In a share sale, sellers are expected to provide: • warranties in relation to the company and the business; and • specific indemnities for known liabilities and for other potential breaches. It is common to provide an indemnity or tax cov- enant that specifically covers tax issues – with a different limit on the indemnified amount and the time period in which to make a claim against a seller. 5.2 Tax Consequences Depending on the structure of the transaction and the profile of the seller and buyer, various forms of tax apply. Stamp Duty In the case of the sale of a private company to a third-party buyer, instruments relating to shares in a Singapore-incorporated company and immovable property are subject to stamp duty. Stamp duty is payable in relation to the transfer of shares in a private company incorporated in Singapore. In practice, the most common instru- ment (document) attracting stamp duty under the First Schedule to the Stamp Duties Act 1929 of Singapore is the share transfer form. The amount of stamp duty payable in such cases is 0.2% of the higher of:
Unless it is contractually agreed between the parties, the buyer is liable to pay the stamp duty. Typically, shareholders of the parent company that will receive shares in the spun-off company are liable to pay stamp duty. Stamp duty relief may be applicable in instances where the shares are transferred between associated entities. However, one of the main conditions required for a relief application is valuable consideration for the transfer of shares. Where the shares in the spun-off company are distributed to sharehold- ers of the parent company without valuable con- sideration, stamp duty relief is unlikely to apply. In relation to asset transfers, buyer’s stamp duty is payable by the buyer for documents executed for the transfer or sale and purchase of immov- able property located in Singapore. The buyer’s stamp duty is calculated based on either the actual consideration paid or the market value of the property (whichever is higher). Assuming the properties owned by technology companies are non-residential properties, these
are the current stamp duty rates: • 1% on the first SGD180,000; • 2% on the next SGD180,000; • 3% on the next SGD640,000; • 4% on the next SGD500,000; and • 5% on the remainder.
Where the immovable property being trans- ferred is a residential property or has a residen- tial component (ie, the property is approved for residential purposes and/or within an area zoned residential, whether fully or partially), a higher rate of buyer’s stamp duty and additional buyer’s stamp duty may also be payable on the residen- tial component.
• the actual consideration paid; and • the net asset value of the shares.
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