The Mergers and Acquisitions (M&A) Allowance in Singapore: How the Tax Relief Works

When a Singapore company acquires shares in another company, the purchase price is, for tax purposes, ordinarily a capital transaction: no revenue deduction, and the cost simply becomes the base cost of an investment sitting on the balance sheet. Singapore’s Mergers and Acquisitions (M&A) Allowance scheme is a deliberate exception to that default, letting a qualifying acquiring company write down part of its acquisition cost against taxable income over five years, on top of stamp duty relief and a double deduction for deal costs. It is one of the more generous reliefs IRAS administers, and also one of the more frequently overlooked, because many advisers still associate “M&A tax relief” purely with large listed-company transactions rather than ordinary SME share acquisitions.

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What the M&A Allowance Scheme Provides

The scheme, administered by IRAS and most recently consolidated in its e-Tax Guide on the Mergers and Acquisitions Scheme (Seventh Edition), gives a qualifying acquiring company three distinct benefits in connection with an approved share acquisition completed between 1 April 2010 and 31 December 2030:

1. The M&A allowance itself

For qualifying share acquisitions completed from 1 April 2016 to 31 December 2030, the acquiring company can claim an M&A allowance equal to 25% of the value of the acquisition, capped at S$10 million for all qualifying acquisitions in the basis period for each Year of Assessment. The allowance is written down on a straight-line basis over five years and, once elected, cannot be deferred or accelerated.

2. Stamp duty relief

Stamp duty that would otherwise be payable on the instrument of transfer, or the contract or agreement for sale of the equitable interest in the acquired shares, is relieved subject to a cap that has varied by acquisition period; for acquisitions from 1 April 2016 onwards, relief is capped at S$80,000 per financial year.

3. Double tax deduction on transaction costs

Professional fees and other transaction costs directly incurred in respect of a qualifying share acquisition, such as legal, tax and accounting due diligence fees, can qualify for a 200% deduction, separate from and in addition to the M&A allowance on the acquisition cost itself.

Core Eligibility Conditions

Worked Illustration

Suppose a Singapore holding company acquires 100% of the ordinary shares in a target company for S$4 million in a qualifying transaction completed in 2026, and incurs S$120,000 in legal, financial and tax due diligence fees directly related to the deal.

The combined effect is a meaningful reduction in the acquiring company’s effective cost of the transaction, spread across the write-down period rather than taken as a single immediate deduction, which is precisely the point: the scheme rewards acquirers who intend to hold and integrate the target business over the medium term, not those structuring a quick flip.

How to Claim

The M&A allowance, stamp duty relief and double deduction are claimed through the acquiring company’s annual Corporate Income Tax Return (Form C-S or Form C) for the relevant Year of Assessment, supported by the documentation IRAS specifies in the e-Tax Guide: completion accounts or sale and purchase agreements evidencing the acquisition value, a breakdown of qualifying transaction costs, and confirmation of the shareholding thresholds achieved. Because the relief interacts closely with ordinary corporate tax computation and with the broader acquisition structuring (including whether the deal is better done as a share purchase at all), it is worth bringing a tax adviser in before the sale and purchase agreement is signed, not after.

Where This Sits Alongside Other Group Restructuring Tools

Companies evaluating an acquisition should also consider how the M&A allowance interacts with other reliefs and structures already in play, including whether brought-forward losses and capital allowances in the target survive the change in shareholders under the continuity tests in the Income Tax Act, and whether the group’s financing and holding structure should be revisited through a Singapore investment holding company. Where the acquisition is large enough to trigger related-party financing or pricing questions, transfer pricing documentation obligations may also need to be addressed as part of the same exercise.

Plan the Claim Before You Sign

The M&A allowance scheme rewards acquirers who structure the deal with the relief in mind from the outset, since eligibility turns on specific shareholding thresholds, documentation and post-acquisition conduct that are far easier to satisfy by design than to retrofit after completion. Raffles Corporate Services works with clients on the accounting and tax filing side of share acquisitions, including preparing the supporting computations IRAS expects for an M&A allowance claim.

Frequently Asked Questions

Does the M&A allowance apply to an acquisition of business assets rather than shares?

No. The scheme is specifically targeted at qualifying share acquisitions. An asset purchase, where the buyer acquires specific assets and liabilities rather than the target’s shares, falls outside this particular relief, though it may have its own distinct tax treatment.

What happens if the acquiring company disposes of the shares during the five-year write-down period?

Disposing of the acquired shares within the prescribed holding period can trigger a clawback of the M&A allowance already claimed, which is why the scheme is better suited to acquirers with a genuine intention to hold and integrate the target rather than those planning a near-term resale.

Can the M&A allowance be combined with other tax incentives on the same acquisition?

This depends on the specific incentives involved and whether the target or acquirer already benefits from other concessions, such as a tax incentive scheme under the Economic Expansion Incentives Act. Interaction effects should be checked with a tax adviser before the acquisition structure is finalised, since some reliefs are mutually exclusive in practice.

Is pre-approval from IRAS required before claiming the M&A allowance?

The relief is generally claimed through the company’s tax return with supporting documentation rather than requiring a separate upfront approval application, though companies with unusual or borderline structures may wish to seek an advance ruling from IRAS for certainty before relying on the relief.

This article is for general information only and does not constitute tax advice. For advice specific to your transaction, please consult a qualified tax professional.

The Editorial Team, Raffles Corporate Services