Business sale as a going concern

Business Sale - Tax issues on transfer of assets

Business Sale requires the passing of title to assets from the Singapore company to the purchaser. The Singapore company’s assets may include land and/or premises, plant and machinery, stocks, debtors, intellectual property rights, goodwill, leasing, hire purchase and other contracts. It will therefore be necessary to transfer the ownership of each asset, or category of assets, by legal means from the Singapore company to the purchaser.

Any gain realised on the sale of any capital asset by the vendor will not be subject to tax. However, if capital allowances had previously been claimed in respect of the asset (for example, industrial buildings, plant or machinery), a balancing charge or allowance may be applicable. A balancing charge is applicable (up to the amount of capital allowances previously claimed) if the consideration for the sale of the asset exceeds the tax written down value of the asset . Conversely, if the consideration for the sale of the asset is less than the tax written down value of the asset, a balancing allowance for the difference may be claimed by the vendor.

Agreement regarding the amount of consideration paid in respect of each capital asset is important as the purchaser will claim capital allowance for each such capital asset based on the cost paid for the asset. Under the Singapore Income Tax Act, Chapter 134, any transfer of plant or machinery at less than market value will be treated as if the sale is at market value.

Any gain realised on the sale of trading stock in hand by the vendor will be subject to tax. Where the purchaser will not claim the cost of the trading stock as an expense and even if sold at below market price(because it would not be trading stock held for reselling in the purchaser’s business), the sale of the trading stock by the vendor is deemed to be made at market value.

Further considerations to be taken into account for a business sale as a going concern is discussed under the article heading Transfer of Business as a Going Concern- GST Considerations


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