Changes to Singapore’s stamp duty regime

Following the recent amendments to the Stamp Duties Act (SDA), which took effect on 11 March 2017, key changes have been made to Singapore’s stamp duty regime that significantly affect share transfers of Singapore companies. Prospective parties to mergers and acquisitions (M&A) in Singapore should be mindful of these changes.

Point of duty for share transfers

Prior to the amendments, in relation to contracts dutiable as “conveyance[s] on sale”, the SDA provided an exception for any contracts for the sale of shares (i.e., a sale and purchase agreement [SPA]). Accordingly, in relation to share transfers, stamp duty was payable only on the execution of the transfer instruments (namely share transfer forms) upon the completion of the transfer.

Under the amended SDA, the exception for contracts for the sale of shares has been removed. Accordingly, stamp duty on the transfer of shares is now payable upon the execution of the SPA.

Practical implications. Where M&A transactions are structured with a deferred closing, stamp duty on the transactions are now payable upfront upon signing the SPA, and not subsequently on completion. This introduces new issues that the parties should consider:

1. Which party should pay the stamp duty upfront upon signing the SPA?
2. Which party should apply to Inland Revenue Authority of Singapore (IRAS) for a remission or other adjustments to the stamp duty amount if completion does not occur, or if there are revisions to the stamp duty payable?
3. How should the costs of the stamp duty paid be allocated amongst the parties in the event that the IRAS rejects the remission application?

Parties to M&A transactions should comprehensively address such issues in the SPA.

Lisa Lim and Wong Ying-chung are associates at Central Chambers Law Corporation.