27 April 2018

On 11 April 2018, the Stamp Duties (Agreements for Sale of Equity Interests) (Remission) Rules 2018 (“Remission Rules”) came into operation. The Remission Rules provide for the remission of stamp duty on:

  • contracts or agreements for the sale of any stock or shares, provided such contracts or agreements are not subject to additional conveyance duties (“ACD”); 
  • contracts or agreements for the sale of book-entry securities which are subject to ACD; and 
  • aborted agreements for the sale of equity interests executed on or after 11 March 2017.

Background

On 11 March 2017, the Stamp Duties Act (“Act”) was amended by the Stamp Duties (Amendment) Act 2017 to impose ACD on the acquisition and disposal of certain equity interests in property holding entities (“PHEs”). A PHE is (a) a target entity that holds properties that may be used for residential purposes and the market value of such properties makes up at least 50% of the value of the entity’s total tangible assets (“Type 1 PHE”), or (b) a target entity which has at least a 50% beneficial interest (directly or indirectly) in one or more entities each of which is a Type 1 PHE and the aggregate of the market value of such residential properties beneficially owned by the target entity (directly or indirectly) through such related entities is at least 50% of the total tangible assets of the target entity and all the entities which the target entity has at least a 50% beneficial interest in (directly or indirectly).

The Remission Rules provide for remission of duty on certain types of contracts or agreements that were subject to stamp duty following the 11 March 2017 amendments to the Act.

Remission of stamp duty on agreements for sale of stock or shares not subject to ACD

Prior to 11 March 2017, section 22(1) of the Act provided for contracts and agreements for the sale of (a) any equitable estate or interest in any property, or (b) any estate or interest in any property except property situated outside Singapore, and stock or shares, to be charged with the same ad valorem duty as if it were an actual conveyance on sale of the estate, interest or property contracted or agreed to be sold. In practice, this meant that stamp duty in respect of stocks or shares was payable on the instruments of transfer (i.e. on the share transfer forms) and not on the sale and purchase agreements to which the proposed transfers relate.

However, an amendment in the Stamp Duties (Amendment) Act 2017 (“2017 Amendment”) removed the exception for contracts or agreements for the sale of stock or shares. This effectively imposed the obligation to pay stamp duty once the sale and purchase agreement was executed.

With the implementation of the Remission Rules, the stamp duty chargeable by reason of section 22(1) of the Act on contracts or agreements for the sale of any stock or shares that is not subject to ACD is remitted. With this, the pre-11 March 2017 stamp duty position for all shares which do not attract ACD is reinstated. Accordingly, stamp duty is imposed on the instrument of transfer of stocks and shares, and not on the sale and purchase agreement.

Remission of stamp duty on agreements for sale of book-entry securities subject to ACD

The Remission Rules also provide that, in relation to a contract or agreement for the sale of any book-entry securities that is subject to ACD, the following duties chargeable on the contract or agreement are remitted:

  • the stamp duty chargeable on the contract or agreement for the sale of such securities or any interest thereof by reason of section 22(1) of the Act; and 
  • ACD.

Therefore, contracts or agreements for the sale of scripless shares cleared through The Central Depository (Pte) Limited are now also not subject to stamp duty or ACD (i.e. similar to the position for such shares prior to the 2017 Amendment).

Remission of stamp duty on aborted agreements

In relation to a contract or agreement for the sale of equity interests in an entity executed on or after 11 March 2017 where the contract or agreement is rescinded or annulled, and the purchaser did not procure the rescission or annulment with a view to facilitating the disposition of the equity interests by the vendor to another person, the amount in excess of S$50 of each of the following duties that is chargeable on the contract or agreement is remitted:

  • the stamp duty chargeable on the contract or agreement for the sale of such equity interests or any interest thereof by reason of section 22(1) of the Act; and
  •  ACD.

This remission of duty on aborted agreements is applicable only if:

  1. the person who paid or is liable to pay the duty provides such evidence of the rescission or annulment as may be required by the Commissioner of Stamp Duties (“Commissioner”) within six months starting on the date of the rescission or annulment (or within such longer period as the Commissioner considers reasonable, if the evidence cannot be provided within six months starting on the date of the rescission or annulment because of unavoidable circumstances); and 
  2. the contract or agreement is surrendered for cancellation within the period mentioned in paragraph 1. above, unless the Commissioner dispenses with the surrender in a particular case or the instrument has already been surrendered for cancellation in relation to an earlier remission under this provision on remission of duty on aborted agreements.

Reference materials

The Stamp Duties (Agreements for Sale of Equity Interests) (Remission) Rules 2018 are available on Singapore Statutes Online sso.agc.gov.sg or may be accessed by clicking here.

 

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