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Exemption of gains or profits from disposal of ordinary shares

Income Tax Act 1947

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—(1) There is exempt from tax any gains or profits derived by a company (called in this section the divesting company) from the disposal of ordinary shares in another company (called in this section the investee company) which are legally and beneficially owned by the divesting company immediately before the disposal, being a disposal —(a)during the period between 1 June 2012 to 31 December 2027 (both dates inclusive); and(b)after the divesting company has, at all times during a continuous period of at least 24 months ending on the date immediately prior to the date of disposal of such shares, legally and beneficially owned at least 20% of the ordinary shares in that investee company.(2) Subsection (1) only applies if the divesting company provides, at the time of lodgment of its return of income for the year of assessment relating to the basis period in which the disposal occurs, or within such further time as the Comptroller may allow, such information and supporting documents as may be specified by the Comptroller.(3) In determining the amount of gains or profits which are exempt from tax under subsection (1) for any year of assessment, there are to be deducted all outgoings and expenses wholly and exclusively incurred by the divesting company in the production of such gains or profits, including —(a)the price paid in acquiring those shares;(b)any sum payable by way of interest upon any money borrowed by the divesting company, where the Comptroller is satisfied that the interest was payable on capital employed to acquire the shares;(c)any sum payable in the basis period for the year of assessment 2008 or a subsequent year of assessment in lieu of interest or for the reduction thereof, upon any money borrowed by the divesting company, being a sum of a type prescribed under section 14(1)(a)(ii), where the Comptroller is satisfied that it was payable on capital employed to acquire the shares;(d)any legal costs incurred for the acquisition or disposal of the shares;(e)any amount paid in respect of stamp duty for the acquisition or disposal of the shares; and(f)any other expenses allowable under this Act which are directly attributable to those gains or profits.(4) In determining for the purposes of subsection (1) whether the divesting company legally and beneficially owns at any time at least 20% of the ordinary shares in the investee company, the divesting company is treated as the legal and beneficial owner of any ordinary shares in that investee company during the borrowing period when the legal interest in such shares had been transferred by the divesting company to another under a securities lending or repurchase arrangement.(5) Where —(a)gains or profits derived from the disposal of ordinary shares by the divesting company is exempt from tax under subsection (1); and(b)one or more of the amounts referred to in subsection (6) which are attributable to any of the shares disposed of, have been allowed as a deduction to the divesting company for any year of assessment prior to the year of assessment relating to the basis period in which the shares are disposed of,then the amounts in paragraph (b) are regarded as income of the divesting company that is chargeable to tax for the second‑mentioned year of assessment.(6) Subsection (5) applies to the following amounts:(a)any amount provided for a diminution in the value of the shares;(b)any amount written off against the value of the shares;(c)any impairment loss for the shares;(d)any loss recognised in accordance with FRS 39, SFRS for Small Entities, FRS 109 or SFRS(I) 9 (as the case may be), in determining the profit or loss or expense in respect of the shares.(7) Where —(a)gains or profits derived from the disposal of ordinary shares by the divesting company is exempt from tax under subsection (1); and(b)any write‑back for a diminution in the value of the shares, or profit recognised in accordance with FRS 39, SFRS for Small Entities, FRS 109 or SFRS(I) 9 (as the case may be), which is attributable to any of the shares, has been charged to tax as income of the divesting company for any year of assessment prior to the year of assessment relating to the basis period in which the shares are disposed of,then the write‑back or profit referred to in paragraph (b) is regarded as an expense allowable under this Act to the divesting company for the second‑mentioned year of assessment.(8) This section does not apply to —(a)the disposal of shares the gains or profits of which are included as part of the income of a company referred to in section 26;(b)the disposal of shares before 1 June 2022 in a company that —(i)is in the business of trading Singapore immovable properties; or(ii)principally carries on the activity of holding Singapore immovable properties,other than property development, where the shares are not listed on a stock exchange in Singapore or elsewhere;(ba)the disposal of shares on or after 1 June 2022 not listed on a stock exchange in Singapore or elsewhere, being shares in a company that the Comptroller is satisfied —(i)is in the business of trading immovable properties situated whether in Singapore or elsewhere;(ii)principally carries on the activity of holding immovable properties situated whether in Singapore or elsewhere; or(iii)has undertaken property development in Singapore or elsewhere, except where —(A)the immovable property developed is used by the company to carry on its trade or business (including the business of letting immovable properties), not being a business mentioned in sub‑paragraph (i); and(B)the company did not undertake any property development in Singapore or elsewhere for a period of at least 60 consecutive months before the disposal of shares; or(c)the disposal of shares by a partnership, limited partnership or limited liability partnership one or more of the partners of which is a company or are companies.(9) In this section —“activity of holding immovable properties” excludes the holding of immovable properties where such properties are used to carry on a trade or business, including the business of letting immovable properties;“borrowing period” and “securities lending or repurchase arrangement” have the meanings given by section 10H(12);“disposal”, in relation to shares, means the transfer of both the legal and beneficial interests in the shares to another;“FRS 39” and “SFRS for Small Entities” have the meanings given by section 34A(10);“FRS 109” and “SFRS(I) 9” have the meanings given by section 34AA(15);“property development” means construction or causing the construction of any building or part of a building, and acquisition of land or building for such construction, and for this purpose “construction” means —(a)any building operations, or demolition and rebuilding operations, in, on, over or under any land for the purpose of erecting a building or part of a building; and(b)any alteration or addition to, or partial demolition and rebuilding of, any building or part of a building,that requires the approval of the Commissioner of Building Control under the Building Control Act 1989 or (if carried out in a country outside of Singapore) would have required such approval if it had been carried out in Singapore.[13Z

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