How Stamp Duty Applies When Buying a Singapore Company
When buying the shares of a company, whether public or private, stamp duty will apply. Stamp duty is basically a tax on dutiable documents relating to any (immovable) property in Singapore and stocks or shares. The Stamp Duties Act (“the Act”) is the primary law that dictates the application and extent of stamp duty in Singapore. The specific dutiable documents that stamp duty applies to are stated in the First Schedule of the Act.
Notably, stamp duty is more commonly used in the context of a property purchase. It is important to distinguish this type of stamp duty from the one that applies for company purchases. Stamp duty for property purchases usually applies to lease or tenancy agreements for properties and the transfer documents for property. Buyer’s stamp duty, additional buyer’s stamp duty and seller’s stamp duty are applicable for the transfer documents. Stamp duty may also apply for mortgages. Since the focus of this article is on stamp duty applicable to the purchase of company shares, the aforementioned duties will not be discussed.
To Which Documents Does Stamp Duty Apply?
In the context of share transfers, stamp duty applies for certain dutiable documents. The first instance would be transfer documents for shares. These are documents signed when shares are bought or acquired. It is useful to note that if there is no document executed for the transfer of shares (usually for scripless ones), then no liability for stamp duty will arise. The second instance would be mortgage documents for shares. This refers to documents signed when shares are pledged to obtain a loan from a bank or financial institution.
Calculation of Stamp Duty
The calculation for stamp duty differs between types of documents. For share transfer documents, stamp duty is 0.2% of the purchase price or the value of the shares. The base will be calculated based on the actual price or net asset value of the shares, depending on whichever is higher. For public companies, the value of shares will be calculated according to the average price on the Stock Exchange of Singapore as at the date of the document. If there is no available average price as at the date of the document, the latest average price of the shares can be used. As for mortgage documents, the stamp duty applies to the loan amount.
The documents will have to be stamped before any signing is done. The documents can be stamped through the e-Stamping website, Service Bureaus and e-Terminals at IRAS Surf Centre. There is some leeway for error, with a grace period of 14 days if the document is signed in Singapore and 30 days if the document is received in Singapore after being signed overseas.
Failure to Pay Stamp Duty
The Act has prescribed that use of a dutiable document despite late payment or non-payment of stamp duty as an offence. In such a situation, a penalty of up to 4 times the duty owed can be imposed on the documents. This penalty also applies to documents that are unstamped, insufficiently stamped or stamped late.
Summary of IRAS Stamp Duty Guide
If you have further queries about stamp duty, you may refer to the online guides provided by the Inland Revenue Authority of Singapore (IRAS). IRAS regularly publishes e-tax guides to assist taxpayers in determining the type and extent of tax they have to pay. There is a guide specific to Stamp Duty which provides the basic details on dutiable documents, when and where to stamp them and even a calculator in the sidebar.
Should you still have doubts, it may be worthwhile to consult a legal professional.