SINGAPORE Law and Practice Contributed by: Terence Quek, Benjamin Cheong, Hoon Chi Tern and Favian Tan, Rajah & Tann Singapore
In a sale of industrial immovable property, which some relatively mature technology companies may own and occupy, the seller may be subject to seller’s stamp duty if the property is disposed of within three years of purchase. The seller’s stamp duty rate for these properties depends on their holding period and is as follows: • if held up to one year from time of acquisition to the time of sale – 15% on the sale price or market value of the property, whichever is higher; • if held for more than one year and up to two years: 10% on the sale price or market value of the property, whichever is higher; and • if held for more than two years and up to three years: 5% on the sale price or market value of the property, whichever is higher. As with the stamp duty payable for the transfer of shares, the responsibility to pay the stamp duty in an asset sale is on the buyer but can be contractually allocated. No stamp duty is payable where new shares are issued and allotted to the subscribers. Hence, spin-offs that are structured to involve minimal transfers of shares or assets would reduce the liability to pay stamp duty at the corporate and shareholder level. Goods and Services Tax (GST) Generally, GST is charged at the prevailing rate by GST-registered businesses on all sales of goods and services in Singapore. However, in a transfer of a business as a going concern (TOGC), the transfer of the assets can be treat- ed as an excluded transaction, and GST is not chargeable – provided certain conditions are met. The seller or the buyer may claim input tax for the GST incurred on certain expenses relat- ing to the TOGC.
The GST rate, which is currently set at 8%, will be further increased to 9% with effect from 1 January 2024. Tax Considerations of the Buyer and Seller Depending on the tax residency of the buyer and seller, the asset or share purchase may be treated as revenue or capital. There is no capital gains tax in Singapore. The issue of calculat- ing the balancing allowance or balancing charge may also arise when fixed assets (on which capi- tal allowances have previously been claimed) are involved in an asset purchase. Factors such as allowances and exemptions should be consid- ered by each party, and it is common for tax advisers to be engaged by both the seller and the buyer in a transaction. 5.3 Spin-Off Followed by a Business Combination A spin-off followed by a business combination is possible in Singapore and, although there is no fixed structure through which it may be effected, one option is to use a scheme of arrangement pursuant to Section 210 of the Companies Act. A scheme of arrangement requires the approval of the majority of the target company’s current shareholders, representing at least 75% of the value of the voting shares, either in person or by proxy. If the company is listed or regulated, this must be done in line with the relevant legislation and listing rules. 5.4 Timing and Tax Authority Ruling The timing of a spin-off depends on the trans- action structure and the time needed to obtain consent and fulfil the required conditions, which are particular to each transaction.
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