Share Purchase Agreement Singapore involve certain tax considerations that should be properly understood and planned for as part of the transaction. Here are some key tax impacts to factor in:

Stamp Duty

Stamp duty is payable on the transfer of shares in a Singapore company. The buyer is liable to pay stamp duty to IRAS on the purchase consideration. The typical rate is 0.2% of the consideration. Sellers sometimes agree to share this cost.

Goods and Services Tax (GST)

If the target company is GST-registered, the share transfer is exempt from GST. However, for non-GST registered entities, the deal may be subject to GST at 7% - a cost the buyer bears.

Tax Clearances

Before deal completion, the seller is required to obtain tax clearance certificates from IRAS indicating tax compliance. This covers income tax, GST, and any outstanding taxes.

Capital Gains Tax

Singapore does not levy capital gains tax. Hence, sellers do not incur tax on gains made from selling their shares, unlike income tax. This makes Singapore deals more attractive.

Withholding Tax

If the buyer is not Singapore tax resident, they may be subject to withholding tax of 22% on interest, royalty or technical fee payments to the seller as part of the acquisition. Appropriate exemptions should be applied.

Loss Carry-Forwards

Net operating losses of the target company can be carried forward and used to offset future profits after the sale. However, buyers should review loss recoupment restrictions.

Tax Indemnity

To protect the buyer from undisclosed tax liabilities, the share purchase agreement usually contains tax indemnity clauses and tax disclosures from the seller.

It is important for both buyers and sellers to engage tax professionals early on to develop a comprehensive tax strategy and ensure compliance for the share acquisition in Singapore. Addressing tax considerations upfront prevents unwanted surprises and optimizes deal economics.