Simplified Tax Framework to make it easier for companies to restructure and rationalise

At the Budget Seminar 2009  organised by the Tax Academy of Singapore today, IRAS announced the proposed new tax framework for corporate amalgamations, and seeks feedback on the proposals. 

In his Budget Statement 2009, the Minister for Finance had announced a new simplified framework in tax to make it easier for companies to restructure and rationalise. 

The proposed new framework is intended to give income tax effect to qualifying statutory amalgamations  as if there is no cessation of the existing businesses by the amalgamating companies (and hence no acquisition of the businesses by the amalgamated company) and all risks and benefits that exist prior to the merger are transferred and vested in the amalgamated company.

No Additional Income Tax on Continuing Businesses

IRAS currently treats amalgamating companies as having ceased businesses and disposed of their assets and liabilities, and the amalgamated company having acquired or commenced a new business.  This treatment could give rise to taxable gains in the hands of the amalgamating companies because trading stocks and certain assets are subject to tax based on either the transfer price or open market values.

Under the new tax framework, IRAS will treat the amalgamated company as having “stepped into the shoes” of the amalgamating companies and continued with the business seamlessly.  IRAS will apply the usual tax consequences of a continuing business to the amalgamated company.  The tax treatment of plant and machinery, intellectual property rights and so on that are transferred to the amalgamated company will be determined on the basis that the businesses taken over in entirety have not ceased, but continue in the amalgamated company, as part of the business of the amalgamated company.  

No additional income tax will be imposed purely on account of the transfer.

No GST or Stamp Duties

IRAS clarifies that no GST will be imposed in corporate amalgamations where they meet the same conditions for GST exclusion as in the transfers of going concerns.  In addition, no Stamp Duties will be imposed on the transfer of properties or shares if the corporate amalgamations meet conditions under existing relief schemes.

IRAS Invites Feedback on the Proposed Tax Framework

IRAS welcomes feedback from the public on the proposed framework for corporate amalgamations.   All submissions must include personal particulars such as name of author, the organisation the author works for/represents, email address and contact number. Submissions may be sent to:

Comptroller of Income Tax
Inland Revenue Authority of Singapore
Tax Policy & Rulings Branch
55 Newton Road
Singapore 307987

or email to:  [email protected]. The closing date for submission is 20 Mar 2009.

IRAS Explains Rules on Exemption of Foreign Income

The Minister for Finance had also announced in his Budget Statement 2009 that the scope of the Foreign-Sourced Income Exemption Scheme will be temporarily expanded to cover all foreign-sourced income.

Currently, resident non-individuals and partners of Singapore partnerships are granted tax exemption in respect of specified foreign-sourced income on meeting certain statutory conditions.

To help businesses tap on their sources of funds overseas to meet their business financing needs in Singapore, the scheme has been temporarily expanded to cover all types of foreign-sourced income and the statutory conditions lifted for a one-year period.

For one year starting from 22 Jan 2009, companies can enjoy exemption on foreign income irrespective of the tax jurisdiction from which the income is received.  During this one year, exemption will also be widened to cover foreign sourced interest, rental and royalty income.

Further details on the scope of exemption are now available in the e-Tax Guide “Temporary Liberalisation of Income Tax Exemption for Foreign-Sourced Income Received in Singapore from 22 Jan 2009 to 21 Jan 2010” published on the IRAS website.

Other Announcements made during the Budget Seminar

At the seminar, other topics relating to tax changes  such as Easing business cash-flow, Tax assistance to households, Stimulating bank lending, and Jobs for Singaporeans were also covered. In addition, participants also took part in a panel discussion on Budget 2009, as well as a Roundtable on Managing Tax Risks.

The seminar was attended by about 450 participants, mostly tax and finance professionals from both government and private sectors. There were also some 40 undergraduates, postgraduates, and faculty members from local universities who attended the seminar as part of the Tax Academy’s University Engagement Programme.

Inland Revenue Authority of Singapore