More SMEs poised to conquer ASEAN on back of generous tax cuts

New tax allowances will spur regional M&As.

Singapore SMEs are now better-positioned to take advantage of the ASEAN Economic Community thanks to the government’s generous tax allowance for mergers and acquisitions.

Deputy Prime Minister Tharman Shanmugaratnam yesterday revealed that the tax allowance for acquisition costs will be increased from the current 5% to 25% of the value of acquisition.

The tax allowance will be capped at $20 million, while the allowable claim was lowered from 50% to just 20% of the shareholding eligibility tiers in the target company

Steven Yap, Tax Partner at Deloitte Singapore, stated that the move should be a boon for many Singapore companies, especially SMEs that are contemplating to restructure, acquire, and merge-consolidate.

“It is a big helping hand assisting Singapore SMEs to be scalable for the future especially with the regional economic integration in the Asian Economic Community. The options of either 5% on $100m or 25% on $20 million cap would continue to encourage different types of Singapore SMEs to benefit from the M&A allowance of different deal sizes – as we enter the second half of the 10-year restructuring,” he said.