Essential Guide to Stamp Duty on Transfer of Shares
- Published: 15 April 2025
- 7 min read
- Running a Business
Rodney Wong
Author
Rodney helps customers in Singapore navigate their way through the details and benefits of our products and services, and to see how the application of technology to their needs could be a game changer for their business. A big believer in the power of the written word, he makes tech topics accessible, applicable, but most of all, useful, to encourage entrepreneurs to chase that big idea.
Nisah Rahim
Reviewer
Nisah Rahim is our go-to expert reviewer for all things Corporate Secretary-related in Singapore. As the Corporate Secretary Team Lead and content reviewer, Nisah meticulously examines our blog posts to ensure we provide comprehensive information on Corporate Secretary services such as local regulatory compliance, managing board meetings, maintaining company records, and providing expert advice on corporate governance matters.
When you transfer shares in Singapore, understanding stamp duty is crucial to avoid penalties and ensure compliance. This article explains what buyers and sellers' stamp duty on the shares transfers, how to calculate it, buyer responsibilities, documents, the impact of market value, acquisition dates, and how to pay it.
Key Takeaways
- Stamp duty on share transfers in Singapore is levied based on the purchase price or net asset value, whichever is higher, and must be paid before signing the transfer document.
- Various share transfers, including gifts and transfers between residents and non-residents, are liable to stamp duty; understanding these scenarios helps in compliance with taxation laws.
- Timely payment of stamp duty is crucial to avoid significant penalties, which can reach up to four times the maximum duty owed, and late payments may result in legal repercussions.
Understanding Stamp Duty on Share Transfers
Stamp duty is a tax imposed on specific legal documents. In Singapore, it is applicable to both share transfers and movable and immovable property transfers, including additional buyer’s stamp duty (ABSD rates).
For example, when dealing with residential properties in Singapore, subject property holding entities must ensure that all dutiable documents relating to the transfer are accurately prepared. Even if the transaction involves a mix of equity interests and immovable property in Singapore, such as residential properties, the stamp duty payable is determined on the entire value of the subject residential property.
The person buying is typically responsible for paying the shares stamp duty and ABSD rates unless the contract specifies otherwise, and it must be paid before signing the transfer of company shares document.
When shares are transferred from a nominee to a beneficial owner, the transaction is subject to stamp duty based on the market value of the shares. The duty is determined by comparing two values.
It is based on whichever is higher: the actual price paid or the market value of the shares at the time of transfer. For companies established for more than 18 months from the date of transfer, the NAV is used, while for younger companies, the share allotment actual price is considered.
These nuances ensure that all legal and financial obligations are met. Whether you’re transferring shares within your company or to an external party, knowing the ins and outs of stamp duty and ABSD rates can save you from potential headaches and financial penalties down the line.
Types of Share Transfers Subject to Stamp Duty
Not all share transfers are created equal when it comes to stamp duty. Several types of transactions are subject to this tax, each with specific implications. For instance, share transfers executed by way of gift may incur stamp duty obligations. Similarly, transfers from residents to non-residents can also be liable to stamp duty.
Transfers between existing shareholders typically have specific stamp duty implications based on the market value of the shares and any loan amounts. Understanding these different scenarios helps the buyer and seller in planning agreements, filling documents, and executing share transfers smoothly.
Whether you’re gifting shares to a family member or transferring ownership to an international partner, knowing the applicable stamp duty requirements ensures that you’re fully compliant with Singapore’s taxation laws.
A company secretary ensures share transfers comply with regulations, manages documentation, and liaises with tax authorities on stamp duty. Their expertise helps streamline the process and prevent compliance issues.
How To Calculate Stamp Duty on Share Transfers
Calculating stamp duty on share transfers is straightforward but requires attention to detail. In Singapore, the stamp duty rate is 0.2% of either the purchase price or the shares’ market value of the shares at the time of transfer, whichever is higher.
For companies older than 18 months, the net asset value (NAV) of the shares' stamp duty is used to determine their value. If the company owns movable and immovable property, the current market value is used in the NAV calculation instead of the book value.
Example
Sarah is transferring her company shares, worth $150,000, to a new business partner. Since her company is over 18 months old, the net asset value (NAV) is used to determine the shares' value. At 0.2%, the stamp duty amounts to $300. By ensuring accurate valuation, Sarah avoids underpayment and stays compliant with regulations.
Paying Stamp Duty on Share Transfers
Paying stamp duty and ABSD rates is a critical step in the share transfer process for various reasons. In Singapore, the duty must be settled within a holding period of 14 days after executing the transfer document if done locally.
If the transfer is signed overseas, the payment is due within 30 days from receiving the dutiable document in Singapore. Exceeding the due date may have implications for the buyer.
The payment process is streamlined through the IRAS e-Stamping portal, where users can log in using their SingPass credentials and complete the transaction. Ensuring timely payment is crucial to avoid penalties and ensure compliance.
Step | Action | Key Details |
|---|---|---|
| Logging In | 🔑 Use Corppass to access IRAS e-Stamping portal | Required for transaction processing. |
| Selecting Duty Type | 📂 Choose the correct stamp duty category | Ensures correct tax calculation. |
| Entering Details | 📝 Provide share value & document info | System calculates duty automatically for the buyer. |
| Confirming Payment | ✅ Verify details & complete transfer and ensures that your payment is correctly processed. |
Selecting the relevant stamp duty
Once logged in, users must select the appropriate stamp duty type through the e-Stamping portal. The portal offers clear options for different types of stamp duties based on the document being stamped.
Navigating through the interface and using dropdown menus helps in selecting the correct category of stamp duty, ensuring that you pay the right amount for your specific deal.
Filling in information
Entering accurate acquisition information is vital for calculating the correct stamp duty amount. Users must provide their personal details and specific document information.
Ensuring the accuracy of the information entered helps in avoiding any discrepancies and ensures that the stamp duty calculated is correct. This step is crucial for smooth processing and compliance with legal requirements.
Confirming payment
After filling out the necessary acquisition details, users can confirm their payment by verifying their bank details and selecting their preferred payment method. Carefully check all entered information for accuracy before finalising the transfer.
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Penalties for Late or Non-payment
Failure to pay stamp duty on time can result in significant penalties. In Singapore, if the transfer occurs locally, stamp duty must be paid within 14 days; if executed overseas, payment is due within 30 days of document receipt.
Documents must be stamped before all signatures to avoid any penalties. If a document is stamped within the following time frame after signing, no penalty will be charged, but charges will apply if stamped late.
The penalty for failing to pay stamp duty on time after acquisition can be up to four times the duty owed. If payment is delayed for up to three months from the date of transfer, the penalty is either $10 or the duty amount, whichever is higher. If the date is exceeding three months, a penalty of $25 or four times the duty owed will be applied, whichever is higher.
Additionally, failure to pay stamp duty and ABSD rates can lead to the appointment of agents to recover the debt, impacting access to corporate bank accounts, and potentially result in a Travel Restriction Order, preventing travel out of Singapore until all dues are settled.
Understanding these penalties underscores the importance of timely payment. Ensuring that stamp duty is paid on time helps avoid financial penalties and legal repercussions, making the entire process smoother and more compliant.
Tax Implications of Share Transfers
In Singapore, profits and equity interests made from selling shares are generally not taxed as capital gains, as capital gains are typically exempt. However, taxable gains from share transfers may occur if the deals are considered trading, influenced by factors such as the frequency of trades, dates, market dynamics and the intent behind them.
Maintaining accurate electronic copy of records of share transfers with accurate dates is essential for compliance with financial regulations and corporate governance. If shares are sold frequently with the intent to profit, this may lead to them being classified as trading activity, subjecting the gains to tax. Shareholders follow strict guidelines and company policies on the date of initiating share transfers.
Accounting Entries for Share Transfers
Recording share transfers accurately in your accounting books is crucial for maintaining financial transparency. When shares are transferred among owners, the deal is recorded as a journal entry without involving the business’s bank account.
To record a share transfer, a person should debit the seller’s equity account and credit the buyers’ equity accounts proportionately within the holding period.
Taxable gains from share transfers must be reported as ‘Other Income’ on the individual’s income tax return. Creating a journal entry for the share transfer ensures it is accurately reflected in the company’s financial records, maintaining compliance with accounting standards.
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Transfer of Shares from Nominee to Beneficial Owner
Transferring shares from a nominee to the beneficial owner is a process that enhances legal clarity and ensures that rights are exercised by the rightful owners.
Essential documents for this transfer include the Instrument of Transfer, Notice of Transfer, Board Resolution, Share Certificate, and Share Transfer Form.
While a Notice of Transfer may be used in some cases, it is not a mandatory requirement, unlike the Transfer Form.
The beneficial owner must provide documentation proving the ownership and the authority of the nominee to transfer the shares. Following the correct procedures and submitting the necessary documents help in completing the transfer smoothly and legally.
Benefits of Transferring Shares with Osome
Using Osome for share transfers offers significant advantages, including cost savings, efficiency, and expert support. Clients benefit from a personal accountant without needing to hire additional staff, resulting in substantial cost savings.
Osome provides efficient service and access to expert support during the share transfer process, making it a cost-effective and reliable option for businesses.
Summary
Understanding the stamp duty on share transfers in Singapore is crucial for ensuring compliance and avoiding legal and financial penalties. From calculating stamp duty and paying it on time to understanding the taxation implications and recording accounting entries accurately, each step is essential for a smooth transfer process.
Considering the benefits of using Osome for share transfers can further simplify the process and provide expert support, making it a valuable option for businesses. By following the guidelines and ensuring timely compliance within the time frame and set dates, you can navigate the complexities of share transfers with confidence.
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