PLC Global Finance update for July 2010: Singapore

Practical Law UK Articles 8-502-8863 (Approx. 4 pages)

PLC Global Finance update for July 2010: Singapore

by Allen & Gledhill LLP

Tax

IRAS consultation paper on mergers and acquisitions scheme

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.

MOF conducts public consultation on draft Goods and Services Tax (Amendment) Bill 2010: Implementing Budget 2010 changes

From 1 June 2010 to 18 June 2010, the Ministry of Finance (MOF) conducted a public consultation on a draft Goods and Services Tax (Amendment) Bill 2010 (draft Bill).

The draft Bill seeks to implement the goods and services tax (GST) changes announced in the Budget 2010 Statement, as well as other changes. The primary aim of the exercise was to obtain feedback on the draft legislation.

Scope of consultation exercise

The draft Bill covers Budget 2010 changes as well as other changes to existing tax policies and administration resulting from an ongoing review of the GST system. The following are the proposed tax changes:

Budget 2010 changes. These changes seek to ease the cash-flow management of businesses and lower their GST compliance costs:

Expand the scope of zero-rating of GST for the marine and aerospace industry.
Simplify the accounting of GST on most supplies to the earlier of tax invoice date or payment date.
Introduce a new scheme to allow approved businesses to defer import GST that is currently payable on goods at the point of their entry into Singapore.

Other changes. These changes seek to clarify existing GST legislation or improve GST administration:

Clarify that GST is not chargeable on:
- imported goods that are supplied and remain within free trade zones, zero-GST or licensed warehouses; and
- goods that are locally manufactured, supplied and remain within warehouses licensed under the Customs Act.
Update the Goods and Services Tax Act to align with the methods of valuation as prescribed in Customs legislation or the last selling price, where applicable, for the purpose of valuation of imported goods and thus the levying of import GST.
Clarify the definition of residential property for the purpose of GST exemption.
Introduce measures to facilitate the self-assessment of transactions qualifying under the Approved Contract Manufacturer and Trader scheme.
Allow the Comptroller of Goods and Services Tax to provide for a wider scope of electronic services.

Reference materials

As part of the consultation process, the MOF issued the following materials, which are available on its website:

PLC Global Finance update for July 2010: Singapore | Practical Law