General
Stamp duty is tax on instruments (documents). Generally, stamp duty is payable on the instrument for conveyance, assignment or transfer on sale of any stock or shares or any equity interest of the stocks and shares at a rate of 0.2% of the amount of the consideration on such conveyance, assignment or transfer.
Transfers of Shares in Property-Holding Entities
However, in the case of transfers of equity interests in companies that are considered as property-holding entities (“PHEs”), there are additional stamp duties payable by the transferor or the transferee of the shares on such transfer, or both the transferor and the transferee. The additional stamp duties payable depends on the specific circumstances which include whether the transferor or transferee is or would be a significant owner of the company.
A company may be considered as a PHE if it owns properties zoned or situated on land zoned with a residential element, or if the property is used or permitted to be used for solely residential purposes or for mixed purposes and one of such purposes is residential (“prescribed immovable properties”). Such properties include, for example, those zoned or situated on land zoned as “Commercial and Residential” or “Residential with Commercial at 1st Storey”. A company may also be considered as a PHE if it owns a significant stake in other companies which are considered as PHEs (“indirect” interests in prescribed immovable properties).
There are 2 types of PHEs – Type 1 PHE and Type 2 PHE. A company will be a Type 1 PHE if at least 50% of the market value of its total tangible assets comprise prescribed immovable property.To determine if a company is a Type 2 PHE, its share of the market values of prescribed immovable properties owned by each PHE in which it has a significant stake will need included in the consideration. To distil the legislative provisions into a simplified description, a company is a Type 2 PHE if its direct and indirect interests in prescribed immovable properties are at least 50% of total tangible assets.
There are also provisions relating to situations involving partnerships and limited partnerships[7] and situations involving multi-level ownerships in other entities. In addition, in determining whether a person is a significant owner of an entity, equity interests beneficially owned by each of the person’s associates in the entity are treated as beneficially owned by the person.
Where there are transfers of equity interests (shares) in Property-Holding Entities, there are prescribed formulae for calculating the amount of additional stamp duties payable on the transfer (conveyance) of shares in PHEs by the transferor, transferee or both of them.
It should be noted that the above applies only to entities owning properties which are zoned or situated on land zoned with some residential element in them or which is used or permitted to be used for solely residential purposes or for mixed purposes, one of which is residential. It does not apply to companies which owns non-residential properties – for example, commercial or industrial properties.
The above provisions also apply to conveyance, assignment and contracts for sale of equity interests in an entity.
Contact
Wee Kong Eng
MTax, CA (Singapore), CIA, Dip. in Law, ATP (Income tax & GST), Assoc CVA
K E Wee & Associates PAC, Public Accountants and Chartered Accountants
Email: kongeng@kewee.com.sg
Office: +65 67200950 ext 111
Disclaimer and limitations
Information is updated as at 5 August 2022 and may be subject to change. The above Information may have been summarized, simplified or paraphrased for easier understanding and to suit scenarios more commonly applicable to client companies. It is not meant to be a comprehensive guide or substitute for professional advice. All opinions or interpretations are solely those of ourselves and our partner firms and may be subject to agreement by the relevant authorities. While effort has been made to ensure the accuracy of the above information, we shall not be liable for loss arising directly or indirectly from any inaccuracy or omission in the information provided.
