Tax Framework for corporate amalgamation- Part-1

Corporate amalgamations can be a valuable tool for companies seeking to grow and gain operational efficiencies. In 2009, Singapore introduced a tax framework under Section 34C of the Income Tax Act to mitigate the tax implications that arise from corporate amalgamations.

The framework ensures that the amalgamated company is subject to the tax consequences of a continuing business. It determines the tax treatment of provisions, trading stocks, capital allowances, accruals, prepayments, and other assets transferred to the amalgamated company on the basis that the businesses of the amalgamating companies continue as part of the business of the amalgamated company. It is pertinent to note that this tax framework applies to amalgamations on or after 22 January 2009.

This article provides an overview of the tax treatment of certain Assets, Liabilities & Tax items applicable to qualifying amalgamations under section 34C and highlights critical considerations businesses should consider when undergoing a corporate amalgamation in Singapore.


1. What is a Qualifying Amalgamation?

To qualify for tax relief under Section 34C(2) of the Income Tax Act (ITA), a notice of amalgamation must be issued under Section 215F of the Companies Act 1967, or a certificate of approval must be issued under Section 14A of the Banking Act 1970 on or after 22 January 2009. This is subject to the approval of the Minister for Finance.

A. Income Tax Treatment of Certain Assets, Liabilities and Tax Items


I.Effect of Cancellation of Shares
  • When shares of an amalgamating company are cancelled in an amalgamation, the company is considered to have sold those shares for the price they were bought.
  • If the company had taken out a loan to purchase the shares, and the liability was transferred to the amalgamated company, the amalgamated company cannot deduct the interest or borrowing costs incurred on that liability with effect from the date of amalgamation.
II.Assets on Capital Account
  • After an amalgamation, the amalgamated company should maintain a list of the assets taken over as investment assets acquired from the amalgamating companies as of the amalgamation date.
  • For disposal of assets, the gain or loss on the disposal will be based on the original cost incurred by the amalgamating companies and not on the fair value at the time of amalgamation.

III.Assets on Revenue Account

  • Upon amalgamation, the revenue account assets will be transferred at their respective carrying amounts as per the books of the amalgamating companies.
  • Inventories and/or trading stocks will be taken over at their net book value upon amalgamation.

IV.Reclassification of Assets

When companies amalgamate, assets originally recorded as revenue assets by one company may become capital assets in the books of the newly amalgamated company.

  • In this case, the assets will be considered sold by the original company at their market value when the amalgamation occurred. The gain or loss on these assets will be calculated based on the difference between their market value and the carrying amount in the original company’s books.
  • The same treatment applies to investment assets that become revenue assets in the amalgamated company’s books. The market value or actual amount incurred will be used as the cost of these assets for calculating gains or profits upon disposal.
V.Unabsorbed Capital Allowances, Losses, and Donations
  • Amalgamated company’s own unabsorbed capital allowances, losses and donations:

    (i) The surviving company can use its unabsorbed tax loss items if it passes shareholding and business continuity tests for capital allowances and a 5-year limitation for donations.

    (ii) Shareholding test requirements under sections 23(4) or 37(12) of the ITA must be met, and waiver of the shareholding test can be applied. A waiver of the shareholding test is possible if there is a substantial change in shareholding due to commercial reasons.

  • Amalgamating company’s unabsorbed capital allowances, losses and donations transferred to the amalgamated company:

    (i) Unabsorbed tax loss items of the amalgamating company cannot be transferred to the amalgamated company.
    (ii) Utilization of unabsorbed tax loss items across entities is allowed if amalgamation is for genuine commercial reasons and not tax-motivated.
    (iii) Only income from the same trade or business as that of the amalgamating company immediately before the amalgamation can be used to offset unabsorbed tax losses.


B. Summary of GST Implications for Corporate Amalgamations:


I. Transfer of Business as a Going Concern (TOGC)
  • Amalgamation qualifies as a TOGC if both companies are GST-registered, except if the amalgamated company is/will be in a GST group.
II. GST Registration/Deregistration
  • GST registration status is non-transferable; prevailing rules apply.
  • GST Group Registration/Deregistration:
  • GST group registration status is non-transferable; prevailing rules apply.
III. Major Exporter Scheme (MES)
  • MES status is non-transferable; prevailing rules apply.
  • The amalgamated company must review eligibility and notify Comptroller if it no longer meets MES conditions.
IV. GST Liabilities, Obligations, and Entitlements
  • All GST liabilities, obligations, and entitlements automatically transfer to the amalgamated company.
  • An amalgamated company is entitled to claim bad debt relief on supplies made by the amalgamating company.
  • An amalgamated company is liable to repay input tax claimed by the amalgamating company if payments are not made to suppliers within 12 months.



In conclusion, the tax framework for qualifying corporate amalgamations in Singapore provides a clear and consistent tax treatment for companies undergoing a merger or amalgamation.

The framework aligns with the Companies Act and the Banking Act, and businesses looking to expand their operations and achieve economies of scale can benefit from this framework. However, it is essential to note that businesses should consider several critical considerations when undergoing a corporate amalgamation, including the documentation and information required by the Comptroller of Income Tax.

With careful planning and consideration, companies can navigate the tax implications of corporate amalgamations in Singapore and reap the benefits of their expansion strategy.

Inland Revenue Authority of Singapore (IRAS) (2023, April 21). IRAS e-Tax Guide Tax Framework for Corporate Amalgamations (Fourth Edition) Retrieved from

Considering a corporate amalgamation in Singapore?

Leverage our expert tax consultancy to optimise your qualifying amalgamation in Singapore and achieve maximum financial benefits for your business.

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