Singapore Inc. becoming bolder for acquisitions abroad

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Companies in the city-state announced around US$91 billion of overseas deals this year through September, more than double the US$42 billion of transactions for the same period of 2017. Temasek Holdings and GIC still loom large, but increasingly others are inking their biggest-ever transactions to put Singapore on the world stage.

Many of the next-generation leadership teams in these companies are helmed by executives with multinational experience and they bring a focus on cross-border growth.

Singapore Technologies Engineering Ltd plan a US$630 million deal to buy an aircraft engine components group from General Electric Co. CapitaLand is in the process of acquiring a portfolio of multifamily properties in the US for US$835 million in what is its largest overseas transaction since 2010, while Singapore Press Holdings, owner of The Straits Times newspaper, last month purchased some student accommodation in the UK for US$230 million, its biggest foray abroad. Singapore firms were involved in 468 transactions as buyer of foreign companies this year through September, an increase of 7.8 per cent from the same period of 2017. Globally, M&A activity rose 2 per cent.

Many Chinese companies have too much leverage and are selling off assets to strengthen their balance sheet. Being familiar with the region, Singapore companies are coming in and many do cut-price offers. Firms from Singapore have been involved in 68 acquisitions of Chinese companies so far this year. The volume of transactions jumped from US$4 billion the same period of 2017 to US$20 billion. Temasek’s major transaction was its US$3.5 billion injection to help Bayer AG finance its planned takeover of US competitor Monsanto. GIC was also involved in Blackstone Group’s acquisition of a majority stake in Thomson Reuters Corp’s financial and risk unit.

With the driving force behind overseas acquisitions showing no sign of letting up, Singapore Inc. will continue its offshore push. Firms are looking to acquire new technologies, new sources of growth. The trend should continue as they become more experienced in competing for assets abroad. Since 2005 we help companies expand overseas. Please contact us for a 1 hour free consulting.

How to purchase assets in Singapore

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A purchase of assets in Singapore may give rise to income tax and stamp duty implications for the seller and buyer. Where the asset is a real property, the amount of stamp duty payable on transfer may be substantial. And where capital allowances have been claimed on the assets, they may be recaptured by and taxable to the seller, depending on the consideration. 

For tax purposes, it is advisable to specify in the sale and purchase agreement an allocation that is commercially justifiable. For trading stocks, the transfer can be at net book value. Otherwise, the open market value is substituted as the transfer value. The amount of goodwill written off or amortized to the income statement of the company is non- deductible on the basis that the expense is capital in nature. 

The ITA contains provisions for granting initial and annual tax depreciation allowances on capital expenditure incurred on qualifying assets used. In the case of an asset transfer, the unused tax losses and capital allowances remain with the company unless the transfer is a qualifying corporate amalgamation. Stamp duty is payable on documents relating to the transfer of immovable properties and shares in accordance with the Stamp Duties Act. And the stamp duty payable on documents relating to the transfer of immovable properties is computed based on the higher of the purchase consideration. 

Buyer’s Stamp Duty (BSD) is payable by the buyer at the following rates:  

Value  Buyer’s Stamp Duty rate 
On the first SGD180,000  1 percent 
On the next SGD180,000  2 percent 
On any remaining balance  3 percent 

 Additional Buyer’s Stamp Duty (ABSD) may be payable by the buyer on top of BSD for acquisitions of residential property located in Singapore, depending on the profile of the buyer. Foreigners and non-individuals buying residential property located in Singapore must pay ABSD of 15 percent on the purchase. 

 Stamp duty is payable on documents relating to the transfer of shares in a Singapore company that is executed in Singapore. The rate of duty is 0.2 percent on the higher of the consideration or the value of the shares. IRAS will carry out back-end audit checks to ensure the amount of duty paid reflects the true value of the shares transferred, especially for non-arm’s length transfers. 

 Since 2005 we help companies to enter new market and already over 250 clients trusted us. Do you want to know more about how we can support your expansion? Please call us in any of our 11 offices in the 4 continents, or just email us for conference call.

Mergers & Acquisitions allowance in Singapore

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To provide impetus for SMEs seeking opportunity to grow through acquisitions, Singapore has announced that the cap on value of acquisition will be increased to $40 million for qualifying share acquisitions.  With the M&A allowance at 25% of the value of acquisition, the maximum allowance is capped at $10 million for all qualifying share acquisitions in the basis period for each YA.

 The share acquisition must result in the acquiring company’s ownership of:

  • At least 20% of the ordinary shares of the target company if it owned less than 20% before the date of share acquisition. Companies that wish to claim M&A allowance based on the 20% shareholding threshold will need to meet additional conditions;
  • More than 50% of the ordinary shares of the target company if it owned less than or equal to 50% before the date of share acquisition.

To qualify, the acquiring company must:

  • Be incorporated and a tax resident in Singapore. Where the acquiring company belongs to a corporate group, its ultimate holding company must also be incorporated and be a tax resident in Singapore;
  • For companies under the HQ Tax Incentive Programme, the Maritime Sector Incentive-Shipping-related Supporting Services Scheme, the Economic Development Board, the Monetary Authority of Singapore or the Maritime and Port Authority of Singapore may waive the requirement that the ultimate holding company must be incorporated and tax resident in Singapore;
  • Carry on a trade or business in Singapore on the date of share acquisition;
  • Have at least three local employees throughout the 12-month period before the date of share acquisition;
  • Not be connected to the target company for at least two years before the date of share acquisition.

When the acquisition is made through an acquiring subsidiary, the acquiring subsidiary must:

  • Not claim any tax benefits under the M&A scheme;
  • Not carry on a trade or business in Singapore or elsewhere on the date of share acquisition;
  • Be directly and wholly-owned by the acquiring company on the date of share acquisition.

The wholly-owned acquiring subsidiary may also be indirectly held by the acquiring company on the date of share acquisition. The acquiring subsidiary and each intermediate company above it must also be set up primarily to hold shares in other companies.

The target company must:

  • Carry on a trade or business in Singapore or elsewhere on the date of share acquisition;
  • Have at least three employees working for the company throughout the 12-month period before the date of share acquisition.

 The above conditions may be met by a subsidiary that is directly and wholly-owned by the target company. For qualifying share acquisitions the conditions may also be met by a wholly-owned subsidiary indirectly held by the target company. Since 2005 we help companies to enter Singapore market. Please contact us for more details on our services.

How to prepare for a financing meeting

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Since 2005 we have had the privilege of attending more than 2,000 introductory meetings with companies. Based on that experience, here are few tips to help founding teams prepare for a financing meeting.

Plan to bring at most three people. The CEO and a cofounder, if applicable, and the chief technical person will be enough. The person who understands the market opportunity and the competition best should attend. Some bring their chief financial officer, which is not necessary. Your CEO should be able to speak to financial questions.

This presentation should look very different from the pitch you give to sales prospects. We are not buying your product. You need to demonstrate how great your team is, where your company fits into the world, and how well your group is suited to capitalize on the opportunity.

Come well prepared with a compelling deck, but don’t let the presentation and the plans you have for this meeting take over. A robust two-way discussion is the best. We will tell you what investors are looking for.

It’s important that the meeting not run over its allotted time, typically an hour. Therefore, your deck should take no more than 30 minutes to deliver when not interrupted; with introductions, questions, and discussion, you should be right on time. The CEO should deliver the bulk of the presentation, with others responding to questions.

Any initial meeting is a two-way street. Come prepared, not just with information about your company but with what you are looking for in a financing partner. A second meeting will be your reward to prepare your business expansion. Contact us now, the first meeting is free of charge.

The Best Business Opportunity in Singapore

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If you want to venture into the top small business opportunities in Singapore, here are some appealing options in Singapore worth investing your hard-earned money on.

Although Singapore has very limited arable land, the country has relied heavily on agro-technology for agricultural production and consumption. But the demand for agricultural products seem to be outweighing the supply because there are very few players in the agriculture sector. You are very likely to make huge profits from agriculture in Singapore provided you’re ready to bear the costs of the technology required for boosting production.

Singapore is aggressively developing its biotechnology industry. The government has spent hundreds of millions of dollars on infrastructure, fund research, development, and recruitment of top international scientists. Also, leading drug makers have set up plants in Singapore. However, breaking into this industry requires a huge capital.

Fast foods sell very well in Singapore. This means investors can really make lots of profit selling barbecue, pizza, burger, and so on. This business requires little capital and no formal academic certifications.

Transportation is one of the indispensable necessities. And this is why the demand for transport services is high almost everywhere. As a foreign investor in Singapore, you can start a transport business. If you have little capital, start a taxi service that transports people within local routes.

The electronics industry is the largest in Singapore’s manufacturing sector, accounting for 48% of the total industrial output. There are huge opportunities for businesses that sell electronic products to consumers. With a little capital, you can focus on a narrow range of electronics, but this could be wider depending on your capital.

Most Singaporeans are just too busy to handle their laundry themselves. So, they would rather pay to get this done for them. If you are looking to start a small-scale business in Singapore, consider this option. To start a laundry business, you need no more than a washing machine and a few other equipment such as pressing irons, dryers, and so on.

Cars and other automobiles sell very well in Singapore. And foreigners can easily break into the business. But capital remains the main issue, as the business requires huge capital. However, if you are having little capital, you can start a business that sells auto spare parts instead. They sell well, too.

Because there are many businesses in Singapore, there is high demand for professional financial services such as accounting, auditing, and bookkeeping. If you have a solid background in any of these services, you can make a lot of money in Singapore.

Since 2005 we help companies enter Singapore market. You want to know more about our services, please contact us. The first hour of consultation is free of charge.