Singapore Mergers & Acquisitions (M&A) Allowance: A Detailed Guide

The Mergers & Acquisitions (M&A) Allowance is a tax incentive introduced by the Singapore government to encourage companies to grow through strategic acquisitions. At Apexia Corporate Advisory, we help businesses navigate and claim M&A allowances effectively to optimize tax savings.

What is the M&A Allowance?

The M&A Allowance is a tax deduction granted to qualifying companies that incur qualifying capital expenditure on acquiring the ordinary shares of a target company. This allowance is aimed at encouraging companies to engage in M&A activities to expand their businesses and enhance competitiveness.

Eligibility Criteria

To qualify for the M&A allowance, companies must meet the following conditions:

• The acquiring company must be incorporated and tax resident in Singapore.
• The acquisition must involve at least 20% of the ordinary shares of the target company.
• The target company must be carrying on a trade or business, and its shares must be directly acquired by the acquiring company.
• The acquisition must be completed between 1 April 2010 and 31 December 2025.

Qualifying Capital Expenditure

Qualifying capital expenditure includes the purchase consideration for the ordinary shares acquired and any transaction costs directly attributable to the acquisition, such as:

• Legal fees
• Accounting fees
• Valuation fees
• Stamp duties

M&A Allowance Rates

The M&A allowance is granted at 25% of the qualifying capital expenditure, capped at SGD 40 million per YA. The allowance is written down over five years on a straight-line basis.

Additional Benefits

Companies that qualify for the M&A allowance may also benefit from the following:

• Stamp Duty Relief: Relief is granted on stamp duties incurred on the acquisition of ordinary shares.
• Double Tax Deduction: Companies may claim a double tax deduction for transaction costs incurred on qualifying M&A transactions, subject to approval.

Documentation Requirements

To support your M&A allowance claim, the following documentation is required:

• Acquisition agreements and contracts
• Invoices and payment receipts for transaction costs
• Valuation reports and due diligence documentation
• Proof of the acquiring company's tax residency
• Details of the target company's trade or business

How Apexia Corporate Advisory Can Help

At Apexia, we offer expert guidance on claiming M&A allowances to ensure your business maximizes tax benefits. Our services include:

• Evaluating the eligibility of your M&A transactions
• Preparing and submitting accurate claims to IRAS
• Providing advice on compliance with M&A allowance regulations
• Supporting documentation preparation for audits

With our expertise, you can focus on growing your business while we handle the complexities of tax compliance.