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.
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