Series on Singapore tax laws – Part 10

Restructuring and Liquidation

Merger and division


Tax framework for qualifying corporate amalgamations was introduced in the Budget for 2009 on 22 January 2009

Qualifying amalgamations will be treated as a continuation of the existing business of the amalgamating company by the amalgamated company

Qualifying amalgamation is one where the notice of amalgamation under section 215F of the Companies Act or the certificate of approval under section 14A of the Banking Act is issued on or after 22 January 2009

Treatment of qualifying corporate amalgamations –

  • All risks and benefits that exist prior to the merger are transferred and vested in the amalgamated company
  • Where the amalgamating company held shares in another amalgamating company and the shares of the second company were cancelled upon amalgamation, the first company will be treated as having disposed of the shares for an amount equal to the cost of shares of first company
  • Where the amalgamated company intends to continue holding assets taken over as investment assets, it should maintain a list of these items as at the date of amalgamation
  • Revenue assets including trading stock are generally to be recognized at the carrying amounts, as reflected in the amalgamating companies’ books at the point of amalgamation
  • Availability of unabsorbed capital allowances, losses and donations (tax loss items) to the amalgamated company will continue to be governed by the shareholding test
  • Unabsorbed tax loss items can only be set-off against the income of the amalgamated company from the same trade or business as that of the amalgamating company immediately before the amalgamation

Treatment of non-qualifying corporate amalgamations –

  • Capital gains or losses arising on the transfer of capital assets (including shares) would neither be taxable nor deductible
  • If capital assets transferred pursuant to a merger qualified for capital allowances for industrial buildings and structures or allowances for plant and machinery, a balancing allowance or balancing charge could arise
  • Trading stock transferred with a trade or business pursuant to a merger were valued for tax purposes at the actual transfer value provided the transferee carried on, or intended to carry on a trade or business in Singapore
  • Interest incurred on borrowings to acquire either the shares or a business of a company would be tax deductible

Liquidation –

Company –

  • Liquidator assumes all the functions and duties of an officer of a company
  • Liquidator shall distribute assets of the company to its shareholders only after making full payment of taxes payable by the company
  • Any income derived from trading during the liquidation period shall be treated as business income and assessable as such
  • Income from the mere realization of assets is treated as capital gains and not assessable as such
  • Legal or professional expenses incurred during the dissolution are not deductible business expenses

Shareholders –

  • Distributions from the realization of assets are tax exempt

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