Mergers and Acquisitions

The mergers and acquisitions (“M&A”) scheme was introduced in 2010 to encourage companies to consider M&A as a strategy for growth and internationalisation.

Under the original scheme that was introduced in Budget 2010, an acquiring company that makes a qualifying ordinary share acquisition in a target company during the period from 1 April 2010 to 31 March 2015 (both dates inclusive) can enjoy the following benefits:

- A M&A allowance of 5% of the qualifying share acquisition, subject to an allowance cap of $5 million; and

- Stamp duty relief for the qualifying share acquisition, subject to a stamp duty relief cap of $200,000.

To qualify for the original M&A scheme, the acquiring company had to acquire ordinary shares in a target company, whether directly or indirectly , that resulted in the acquiring company holding:

- More than 50% ordinary shareholding in the target company (if the acquiring company’s original shareholding in the target company was 50% or less); or

- At least 75% ordinary shareholding in the target company (if the acquiring company’s original shareholding in the target company was more than 50% but less than 75%).

In Budget 2012, the M&A scheme was enhanced to provide the further tax benefit to companies:

- Double tax deduction on transaction costs incurred in respect of the qualifying share acquisition, subject to a cap of $100,000 on such acquisition costs 

In Budget 2015, the M&A scheme was extended with the following revisions to further support companies, especially small and medium-sized enterprises ("SMEs"), to grow via strategic acquisitions.

An acquiring company that makes a qualifying ordinary share acquisition in a target company during the period from 1 April 2015 to 31 March 2020 (both dates inclusive) will be granted:

- M&A allowance of 25% of the cost of the qualifying share acquisition, subject to an allowance cap of $5 million. 

- Stamp duty relief for the qualifying share acquisition, subject to a stamp duty relief cap of $40,000.

- Double tax deduction on transaction costs incurred in respect of the qualifying share acquisition, subject to a cap of $100,000 on such transaction costs.

To qualify for the M&A scheme, the acquiring company must acquire ordinary shares in a target company, whether directly or indirectly , that results in the acquiring company holding:

- At least 20% ordinary shareholding in the target company (if the acquiring company’s original shareholding in the target company was less than 20%), subject to conditions; or

- More than 50% ordinary shareholding in the target company (if the acquiring company’s original shareholding in the target company was 50% or less)

In Budget 2016, the M&A scheme was enhanced to support more M&As. The enhancement will take effect for qualifying acquisitions made from 1 April 2016 to 31 March 2020:

Tax allowance of 25% will be granted for up to $40m of consideration paid for qualifying M&A deals per YA; and

Stamp duty relief will be granted for up to $40m of consideration paid for qualifying M&A deals per financial year.

For further details of the M&A scheme and qualifying criteria, please refer to IRAS’ e-tax guide on M&A scheme, which can be found on IRAS’ website


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Last Updated on February 13, 2017
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