Stamp duties on the sale of Singapore-incorporated company shares in private mergers and acquisitions were traditionally payable only at the point of transfer, which is effected via share transfer forms. The Stamp Duties (Amendment) Act 2017 (No. 13 of 2017) changes this requirement, making stamp duties now payable on the execution of a sale and purchase agreement or share transfer form, whichever is executed first.
Previous Stamp Duty Obligations in Share Transfers
Section 22(1) of the Stamp Duties Act (Chapter 312, Singapore Statutes), used to read:
(1) Every contract or agreement for the sale of —
(a) any equitable estate or interest in any property; or
(b) any estate or interest in any property except property situated outside Singapore, and stock or shares, shall be charged with the same ad valorem duty, payable by the purchaser, as if it were an actual conveyance on sale of the estate, interest or property contracted or agreed to be sold.
This section’s effect was to exclude share or stock purchase agreements from stamp duty.
Current Stamp Duty Obligations in Share Transfers
The Stamp Duties (Amendment) Act 2017 amends section 22(1) of the Stamp Duties Act by deleting the words “and stocks or shares,” in subsection 22(1)(b).
The Explanatory Statement to the Stamp Duties (Amendment) Bill (No. 18 of 2017) explains this change:
Clause 5 removes the reference to “stocks and shares” in section 22(1)(b), to clarify that contracts or agreements for the sale of stocks and shares are dutiable. Section 22(1)(b) (as well as section 22(1)(a)) already refers to “property”, which would include stocks and shares. [emphasis added in bold]
What This Means for Transactions in Singapore
In private company mergers and acquisitions in Singapore, stamp duties are now payable on the execution of a sale and purchase agreement or share transfer form for the sale of stocks or shares, whichever document is executed first.
This payment requirement is to be satisfied within 14 days of executing the relevant document. In most cases, the sale and purchase agreement will be executed first.
Stamp duties are payable regardless of whether or not the sale and purchase agreement is conditional or unconditional. If it is a conditional upon the fulfilment of certain obligations and these obligations are not fulfilled, leading to the transaction not being completed, purchasers will need to apply to the Inland Revenue Authority of Singapore for a refund of the stamp duties paid.
If you have any questions about this Alert, please contact Mark See, any of the attorneys in the Duane Morris & Selvam Singapore office or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.