To facilitate mergers and corporate amalgamation of companies in Singapore, a tax framework for corporate amalgamations was introduced in 2009 to minimise the tax consequences arising from qualifying amalgamations.
The tax framework is intended to give effect of tax neutrality to qualifying amalgamations as if there is no cessation of the existing businesses by the amalgamating companies. As such, the tax treatment of provisions, assets and liabilities etc. that exist prior to the amalgamation are transfer and vested in the amalgamated company as if the business of the amalgamating companies had not ceased.
To apply the tax framework, the amalgamated company (i.e. the surviving entity) would be required to make an election under Section 34C(4) of the Singapore Income Tax Act. The election must be made in writing to the Comptroller of Income Tax within 90 days from the date of the qualifying amalgamation. Further, once an election is made by the amalgamated company, it is irrevocable and has to be accompanied by the notice of amalgamation under Section 215F of Singapore Companies Act.
The amalgamated company would be required to furnish the following information to the Inland Revenue Authority of Singapore (IRAS) when making the election:
- Reasons for the amalgamation.
- A copy of the amalgamation proposal – not required for short-form amalgamation.
- Notification of amalgamation.
- Whether trading stock (if any) would be transferred at net book value or fair value.
- A list giving details (including description, date of purchase, original cost, how the asset was financed, purpose of the acquisition by the amalgamating company together with supporting documents, and basis for claiming that the assets are on capital account) of the investment assets taken over by the amalgamated company.
- Finalised set of accounts and tax computations for the current Year of Assessment up to the date of amalgamation of all the amalgamating companies that ceased to exist and all other outstanding returns of these companies.
How NovoPlus can help ?
At Novoplus, we are professionals with years of experience in dealing with corporate restructuring and reorganisation which includes the merger of Singapore companies through the short form amalgamation process and handling any Singapore tax implications that may arise, especially assisting with the Section 34C election to affect the tax neutrality for a qualifying amalgamation.
If you are planning to carry out a merger for your Singapore entities and is wondering if there will be any Singapore tax implications for the amalgamation exercise, please feel free to contact us at finance@novopluscorp.com or reach out to us on Whatsapp using the button on the right of the website to find out more on how we can assist your business.
Last Updated on 15/07/2024 by Dennis Chew