Tax and stamp duty: what sellers should ask about
Share sale versus asset sale, stamp duty on share transfers, and where the tax consequences differ. General information, not advice.
This is general information about how Singapore business sales are usually structured. It is not tax or legal advice, and the right answer depends on your specific position. Take advice before you agree the structure, not after.
Share sale versus asset sale
In a share sale you sell the shares in the company. The company continues, carrying its history, contracts and liabilities with it. Most sellers prefer this.
In an asset sale the company sells selected assets and the buyer leaves the liabilities behind. Most buyers prefer this. Proceeds land in the company rather than with you personally, which raises a second question about how you then extract them.
Which structure applies is negotiable, and it is one of the more consequential things in the term sheet.
Stamp duty on share transfers
Share transfers in Singapore attract stamp duty, calculated on the higher of consideration or net asset value, and payable within a set window after execution. Who bears it is a matter of agreement, and it should be written down rather than assumed.
Unstamped or late-stamped historic transfers are a very common diligence finding in older SMEs. They are fixable, but penalties may apply and the remediation takes time. Check the register of members and the past transfers before you go to market, not during diligence.
Capital gains
Singapore does not tax capital gains. Whether a particular gain is capital in nature, rather than income from a trade, depends on the facts. Owners who buy and sell businesses frequently should take specific advice on this point.
GST and employees
Asset sales raise GST questions, including whether a transfer of a going concern applies. Employees transferring across raise their own set of obligations. Both need handling in the sale agreement rather than after completion.
The practical point
Structure affects net proceeds materially, sometimes more than a further round of price negotiation would. Bring your tax advisor in when the term sheet is being drafted, which is early enough to change the structure, rather than at completion, which is not.
Read next
Preparing your business for sale
The twelve to eighteen months before you go to market decide most of the price. Here is what to work on, in the order that pays best.
How Singapore SMEs are valued
Adjusted EBITDA, sector multiples, and the bridge from enterprise value to the money that reaches your account.
Succession planning for Singapore SME owners
Family succession, management buy-out, trade sale or staged exit. How to choose, and how early to start.
Thinking about selling in the next two years?
A confidential 30 minute call. We tell you what your business is likely worth and what to fix first.