Stamp Duty and GST When Selling a Business in Singapore

Do you pay stamp duty when you sell a business in Singapore?

It depends on what is being sold: a sale of company shares attracts stamp duty, while a sale of the business itself generally attracts duty only on the documents that deal with property, such as a lease.

IRAS describes stamp duty as a tax on dutiable documents relating to immovable property in Singapore and to stock or shares (IRAS, stamp duty basics). It is a tax on documents, not on the deal as a whole. So the first question in any education business sale, whether a childcare centre, a tuition centre or an enrichment school, is the deal structure. If the buyer is buying the shares of your company, the share transfer is dutiable. If the buyer's own entity is buying the business, the goodwill, furniture, equipment and curriculum materials are not stock, shares or immovable property, and the lease is where duty usually arises.

Our guide to share sales and asset sales explains how the structure is chosen. This guide covers the tax mechanics once it is.

How much stamp duty is payable on a share transfer?

Stamp duty on a transfer of shares is 0.2% of the purchase price or the value of the shares, whichever is higher.

The detail, from IRAS's page on buying or acquiring shares:

• Rate: 0.2%, applied to the actual price or the value of the shares, whichever is higher.
• Value of private company shares: based on net asset value (total assets minus total liabilities) or, for some newer companies, the allotment price. For a company incorporated more than 18 months before the transfer, net asset value comes from its latest accounts dated within 24 months of the transfer, and property can be restated to market value where book value does not reflect it. For a company incorporated 18 months or less that owns no property, the total allotment price is used.
• Rounding: duty is rounded down to the nearest dollar, with a minimum of S$1.

The "higher of" rule matters in practice. An education company with modest net assets often sells for more than its net asset value, because buyers pay for earnings and goodwill, so duty is normally on the price. Where a company holds a lot of cash and is sold for less than its net asset value, duty is worked out on the value instead. Different rules, called Additional Conveyance Duties, apply where the company is a residential property-holding entity; check with IRAS if that could apply.

Who pays share stamp duty, and when?

The buyer pays by default, and the share transfer document must be stamped within 14 days of signing if it is signed in Singapore.

IRAS says the party liable is usually stated in the agreement; where the agreement is silent, the buyer or transferee pays (IRAS, who should pay stamp duty). Sellers and buyers can agree to split it, so put it in the Sale and Purchase Agreement rather than leave it to the default.

On timing, IRAS requires stamping within 14 days after signing if the document is signed in Singapore, or within 30 days after it is received in Singapore if it is signed overseas, and penalties apply to late payment (IRAS, when to pay). For an ordinary share sale, duty is paid on the executed share transfer instrument, which should be stamped before it is lodged with ACRA. The Sale and Purchase Agreement itself qualifies for remission where the company is not subject to Additional Conveyance Duties, so it does not need to be stamped separately (IRAS, agreements for sale of equity interests).

Is there stamp duty in an asset sale?

Usually only on the lease documents, plus any property the business owns.

For lease duty, IRAS uses the higher of the contractual rent and the market rent (IRAS, renting a property). Where the business rents its premises and owns no property, the lease is normally the only stamp duty item in an asset sale.

Do you charge GST when you sell a business?

Not on a sale of shares, which is GST-exempt, and not on a sale of business assets either if the seller is not GST-registered; a GST-registered seller selling assets must charge GST unless the sale is a transfer of a going concern.

IRAS lists the issue or sale of shares as an exempt financial service (IRAS, supplies exempt from GST), so a share sale carries no GST on the price. An asset sale is different. Only GST-registered businesses charge GST, so the first thing to check is the seller's registration status. If the seller is registered, the furniture, equipment and other business assets it sells are a supply on which it must account for GST, unless every condition for a transfer of a going concern is met.

What counts as a transfer of a going concern for GST?

A transfer of a going concern is a sale of a business, not just its assets, that meets all five IRAS conditions, and it is excluded from GST.

IRAS's guidance on transferring businesses sets out the conditions:

1. The assets are supplied with the transfer of a business, so the buyer ends up with a business rather than a set of assets.
2. The buyer uses the assets to carry on the same kind of business as the seller.
3. If only part of the business is transferred, that part can operate on its own.
4. The business is not immediately terminated, although a temporary closure to get operationally ready is allowed.
5. The buyer is already a taxable person or immediately becomes one as a result of the transfer.

A childcare centre sold with its children, staff and licence, and run by the buyer as a childcare centre, is the kind of transfer these conditions describe, provided the buyer meets the GST condition. Selling one centre out of several can also qualify if that centre can run on its own. Both parties must keep records of each asset transferred and its value. If any condition fails, the GST-registered seller accounts for GST on the sale, so the agreement should say whether the price includes or excludes GST.

Are childcare and tuition fees exempt from GST?

No. Education and childcare fees are not on IRAS's list of exempt supplies, so a GST-registered centre charges GST on its fees.

IRAS's exempt categories are financial services, digital payment tokens, the sale and lease of residential property, and investment precious metals. Whether a particular centre charges GST therefore depends on whether it is registered. Registration is compulsory where taxable turnover exceeded S$1 million in a calendar year, or is expected to exceed S$1 million in the next 12 months (IRAS, do I need to register for GST). ECDA's Code of Practice reflects this: programme fees shown on subsidy forms must include GST where applicable (s8.2.6).

For a buyer, this matters in two ways. A seller below the threshold may not be registered, so no GST arises on an asset sale. And a buyer whose taxable turnover will exceed the threshold after the purchase needs to consider its own registration, which is also one of the going concern conditions.

What should the sale agreement say about stamp duty and GST?

It should state who bears each tax, whether the price is GST-inclusive or exclusive, and what happens if the going concern treatment fails.

• Which party pays stamp duty on the share transfer or the lease, and who handles stamping.
• The seller's GST registration status, and whether the price is stated before or after GST.
• For an asset sale, the parties' view on whether the going concern conditions are met, and who bears GST if IRAS decides otherwise.
• The buyer's GST registration position at completion.
• How fees collected in advance and deposits are handled, covered in our guide to prepaid fees and deposits at completion.

These rules are set by IRAS, but how they apply to your deal depends on its facts, so confirm the position with IRAS or a tax adviser before signing.

How Edugrow helps

Edugrow has advised on 70+ education business transactions in Singapore since 2014. We raise structure and tax questions early, so stamp duty, GST and the lease are dealt with in the heads of terms rather than in the final week. Edugrow can draft a neutral Sale and Purchase Agreement and coordinates with lawyers and tax advisers where they are involved. If you are planning a sale, see how Edugrow sells education businesses.