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Duty on conveyance of equity interests in property‑holding entities

Stamp Duties Act 1929

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—(1) This section applies to a conveyance —(a)executed while this section is in operation;(b)of equity interests in an entity; and(c)whether or not the conveyance is —(i)on a sale;(ii)by way of gift, release or settlement; or(iii)pursuant to a declaration of trust where the beneficial interest in the equity interests passes.(2) If —(a)the grantee is a significant owner of the entity immediately before the execution of the conveyance, or becomes one upon the execution of the conveyance; and(b)the entity is a property‑holding entity or PHE at the time of the execution,then the conveyance is chargeable with ad valorem duty (called duty A in this section, sections 23B and 23C, Article 3A of the First Schedule and Article 2A of the Third Schedule) that is payable by the grantee.(3) Subject to subsection (4), if —(a)the grantor is a significant owner of the entity immediately before the effective date or becomes one on or after the effective date;(b)the conveyance is executed at any time on or after the effective date and whether at a time when the grantor is still such significant owner or after the grantor ceases to be one;(c)the entity is a PHE at the time of the execution; and(d)the equity interests conveyed comprise or include equity interests in the entity specified in subsection (8),then the conveyance is chargeable with ad valorem duty (called duty B in this section, sections 23B and 23C, Article 3A of the First Schedule and Article 2A of the Third Schedule) that is payable by the grantor.(4) Subsection (3) does not apply to any conveyance that is executed in the period between the time the grantor (including the grantor’s associates) ceases to own any equity interests in the entity and the time the grantor becomes a significant owner of the entity again.(5) If, at the time of the execution of the conveyance —(a)the entity (called in this subsection the target entity) is not a PHE; and(b)the grantee beneficially owns equity interests in another entity or entities in circumstances where, had the target entity and the other entity or entities been a single entity —(i)that single entity would have been a Type 2 PHE; and(ii)the grantee would have been a significant owner of that single entity or would have become such significant owner upon the execution of the conveyance,then the conveyance is chargeable with ad valorem duty (called duty C in this section, sections 23B and 23C, Article 3A of the First Schedule and Article 2A of the Third Schedule) that is payable by the grantee.(6) Subject to subsection (7), if —(a)immediately before the effective date or at any time on or after that date, the grantor beneficially owns equity interests in 2 or more entities in circumstances where, had those entities been a single entity —(i)the single entity would have been a Type 2 PHE; and(ii)the grantor would have been a significant owner of the single entity;(b)the conveyance is executed at any time on or after the effective date and whether at a time when the grantor would still be such significant owner or after the grantor has ceased to be one; and(c)the equity interests conveyed comprise or include equity interests in any of those entities and are equity interests specified in subsection (8),then the conveyance is chargeable with ad valorem duty (called duty D in this section, sections 23B and 23C, Article 3A of the First Schedule and Article 2A of the Third Schedule) that is payable by the grantor.(7) Subsection (6) does not apply to any conveyance that is executed in the period between —(a)the time the grantor (including the grantor’s associates) ceases to own any equity interests in any of the entities that comprise the single entity mentioned in that subsection; and(b)the time the grantor beneficially owns equity interests in 2 or more of those entities again in circumstances where, had those entities been a single entity, the grantor would have been a significant owner of that single entity.(8) The equity interests specified for subsections (3)(d) and (6)(c) are those that the grantor acquired —(a)on or after the effective date; and(b)within the prescribed holding period before the execution of the conveyance,and, for this purpose, where the grantor acquired the equity interests at different times, then the equity interests first acquired by the grantor are treated as being disposed of first by the grantor.(9) To avoid doubt, both duty A and duty B, or both duty C and duty D (as the case may be), may be charged on the same instrument, and are in addition to any duty chargeable on the conveyance of shares in Article 3(c) of the First Schedule.(10) The amounts of duty A, duty B, duty C and duty D are indicated in Article 3A of the First Schedule.(11) For the purposes of this section and Article 3A of the First Schedule, a significant owner of an entity is a person who beneficially owns a percentage of the equity interests in the entity —(a)that is equal to or more than the percentage prescribed in the section 23 Order as the equity‑owning percentage; or(b)that carries voting power in the entity that is equal to or more than the percentage prescribed in the section 23 Order as the voting power percentage.(12) For the purposes of this section and Article 3A of the First Schedule —(a)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; and(b)in determining whether a grantee becomes a significant owner of an entity upon the execution of a conveyance, equity interests beneficially owned by each of the grantee’s associates in the entity (including those conveyed, transferred, assigned or agreed to be sold to any of the grantee’s associates at or about the same time as the time of execution of the conveyance) are treated as beneficially owned by the grantee.(13) In this section, sections 23A and 23C and Article 3A of the First Schedule, an entity is a PHE if —(a)the percentage of the market value of the total tangible assets of the entity as at the end of the most recent completed accounting period of the entity that comprise prescribed immovable property, is equal to or more than the percentage prescribed in the section 23 Order as the Type 1 PHE percentage; or(b)where the entity has a significant stake in one or more entities each of which is a Type 1 PHE, the percentage calculated by the formula is equal to or more than the percentage that is prescribed in the section 23 Order as the Type 2 PHE percentage,and the entity is not an entity prescribed as a non‑PHE under the section 23 Order.(14) For the purposes of subsection (13)(b), the amount E is determined by adding both of the following:(a)the sum of the market values of all prescribed immovable properties that form part of the entity’s total tangible assets as at the end of its most recent completed accounting period;(b)the sum of all amounts calculated for each Type 1 PHE in which the entity has a significant stake, using the formula G × H, where —(i)G is the percentage of equity interests in the Type 1 PHE beneficially owned by the entity; and(ii)H is the sum of the market values of all prescribed immovable properties that form part of the total tangible assets of the Type 1 PHE as at the end of the most recent completed accounting period of the Type 1 PHE.(15) For the purposes of subsection (13)(b), the amount F is determined by adding both of the following:(a)the market value of the total tangible assets of the entity as at the end of its most recent completed accounting period;(b)the sum of all amounts calculated for each entity (called in this subsection the 2nd entity) in which the entity has a significant stake, using the formula G1 × I, where —(i)G1 is the percentage of equity interests in the 2nd entity beneficially owned by the entity; and(ii)I is the market value of the total tangible assets of the 2nd entity as at the end of the most recent completed accounting period of the 2nd entity.(16) For the purposes of subsections (13), (14) and (15), an entity has a significant stake in another entity if the percentage of equity interests in the other entity which it beneficially owns is not less than the percentage prescribed in the section 23 Order as the significant stake percentage.(17) For the purposes of subsections (14)(b), (15)(b) and (16), in a case where an entity (X) (being a partnership or limited partnership) beneficially owns equity interests in another entity (Y), a partner of X that is itself an entity is taken to beneficially own a percentage of equity interests in Y that is calculated according to the formula L × M, where —(a)L is the percentage of the partner’s share in the partnership; and(b)M is the percentage which the value of equity interests in Y owned by X bears to the total value of all equity interests in Y.(18) For the purposes of subsections (14)(b), (15)(b), (16) and (17), if —(a)an entity (called in this subsection the subject entity) beneficially owns (including by reason of one or more applications of this subsection) equity interests in another entity (called in this subsection the 1st level entity); and(b)the 1st level entity beneficially owns equity interests in another entity (called in this subsection the 2nd level entity),then the subject entity is taken to beneficially own a percentage of equity interests in the 2nd level entity that is calculated according to the formula N × O, where —(c)N is the percentage which the value of equity interests beneficially owned by the subject entity in the 1st level entity bears to the total value of all equity interests in the 1st level entity; and(d)O is the percentage which the value of equity interests beneficially owned by the 1st level entity in the 2nd level entity bears to the total value of all equity interests in the 2nd level entity.(19) To avoid doubt, in determining, for the purposes of subsections (14)(b), (15)(b), (16), (17) and (18), the percentage of the equity interests in an entity that are beneficially owned by another entity, all of the equity interests that the other entity owns, whether directly, or indirectly under subsection (18) through one or more chains of ownership, are to be added together.(20) In this section, section 23A and Article 3A of the First Schedule, a person (X) is an associate of another person (Y) if —(a)X is the spouse, a parent, a grandparent, a child, a grandchild or a child of a parent of Y;(b)X and Y are partners in a partnership, limited partnership or limited liability partnership;(c)X is a person with whom Y has an agreement or arrangement, whether oral or in writing and whether express or implied, to act together with respect to the acquisition, holding or disposal of equity interests in, or with respect to the exercise of their votes in relation to, the entity in question; or(d)X is associated with Y in such manner as may be prescribed in the section 23 Order.(21) In this section, sections 23A to 23D and Article 3A of the First Schedule —“child”, in relation to a person, means a legitimate child or stepchild of the person or a child adopted by the person in accordance with any written law relating to adoption;“effective date” means the most recent date on which this section and sections 23A, 23B and 23C come into operation;“entity” means —(a)a company;(b)a partnership, limited partnership or limited liability partnership; or(c)a property trust;“equity interest”, in relation to an entity, means —(a)where the entity is a company, an issued share in the company that is not a treasury share;(b)where the entity is a partnership, limited partnership or limited liability partnership, a share in the partnership; or(c)where the entity is a property trust, a unit in the trust;“limited partnership” means a limited partnership registered under the Limited Partnerships Act 2008;“prescribed immovable property” means the type of immovable property prescribed as prescribed immovable property by the section 23 Order;“property trust” means a trust that holds or invests in —(a)prescribed immovable properties; or(b)equity interests in an entity that holds or invests in prescribed immovable properties;“section 23 Order” means the order made under section 23D bringing this section and sections 23A, 23B and 23C into operation;“share”, in relation to a partnership, limited partnership or limited liability partnership, means —(a)the proportion of the partnership property that a partner is entitled to on the dissolution or winding up of the partnership, as specified in the partnership agreement; or(b)if none is specified, the proportion of the profits of the partnership that a partner is entitled to;“Type 1 PHE” means an entity that is a PHE by reason of subsection (13)(a);“Type 2 PHE” means an entity that is a PHE by reason of subsection (13)(b);“underlying property”, in relation to a PHE, means —(a)if the PHE is a Type 1 PHE, the prescribed immovable property that forms part of its total tangible assets;(b)if the PHE is a Type 2 PHE, all of the following:(i)the prescribed immovable property that forms part of the total tangible assets of each Type 1 PHE in which the Type 2 PHE holds a significant stake as defined in subsection (16); and(ii)the prescribed immovable property that forms part of the total tangible assets of the Type 2 PHE; or(c)if the PHE is both a Type 1 PHE and a Type 2 PHE, the properties in sub‑paragraphs (i) and (ii) of paragraph (b);“unit”, in relation to a property trust, means —(a)a share in the beneficial ownership in the property subject to the trust; or(b)a share in the profits, income or other payments or returns from the management of the property or operation of the business premised on the property.(22) In this section, sections 23A and 23C and Article 3A of the First Schedule —(a)a reference to equity interests that are beneficially owned by a person includes equity interests agreed to be sold to the person under a contract or agreement for the sale of equity interests; and(b)a reference to an entity beneficially owning equity interests in another entity, in a case where the firstmentioned entity is a property trust, is a reference to the trustee of the trust holding the equity interests as trust property of the trust.(23) In determining if the entities mentioned in subsection (5) or (6) would have been a Type 2 PHE if they were a single entity, subsections (13)(b), (14) and (15) are to be read subject to the following modifications:(a)a reference to the entity is a reference to those entities taken as a whole;(b)a reference to an accounting period of the entity is a reference to the accounting period of each of those entities;(c)a reference to the entity having a significant stake in another entity is a reference to each of those entities having beneficial ownership (including indirectly by applying subsection (18)) of equity interests in another entity which, when added together, constitutes a percentage of equity interests in the other entity that is not less than the significant stake percentage mentioned in subsection (16);(d)such other modifications as may be prescribed by the section 23 Order.

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