As the corporate tax filing season draws nearer, Singaporean businesses should be aware of the deadline on 30 November. This is a great time for businesses to review their corporate structures and strategic plans in addition to fulfilling regular tax obligations. Before the tax season ends, it is imperative that you become familiar with the M&A Scheme if your business is thinking about growing or possibly merging. Deal structures can be optimized, value creation can be improved, and future risks can be reduced by knowing how tax considerations relate to M&A incentives.

The M&A Scheme

The Mergers and Acquisitions (M&A) Scheme is designed to encourage local companies to expand through acquisitions. Whether your business is growing, consolidating, or looking to enter new markets, understanding how this scheme works could unlock valuable tax benefits and strategic opportunities. It can be claimed in the Corporate Income Tax Return.

What Is the M&A Scheme?

Administered by the Inland Revenue Authority of Singapore (IRAS), provides tax incentives to qualifying companies that acquire other Singapore-incorporated businesses. Under the scheme, an acquiring company may enjoy several key benefits:

• M&A Tax Allowance: For qualifying share acquisitions made on or after 1 April 2016, the cap on the acquisition value was raised from S$20 million to S$40 million.
  • The M&A allowance is calculated at 25% of the acquisition value, with the total allowance capped at S$10 million for all qualifying acquisitions within each Year of Assessment (YA).
• Double Tax Deduction on Transaction Costs: up to S$100,000 per YA for qualifying professional and due diligence fees.

* Stamp duty relief no longer implemented for qualifying share acquisition past 31 March 2020

Who Qualifies for the Scheme

To qualify for M&A benefits, both the acquiring company and the target must meet certain conditions. These are designed to ensure that the incentive supports genuine business growth, not short-term or paper-based transactions.

1. Acquiring Company Eligibility

• • Incorporation & tax residency: The company must be incorporated in Singapore and be a tax resident of Singapore.
  • Active business: It must be carrying on a trade or business in Singapore at the date of acquisition.
  • Minimum staffing: At least three local employees excluding directors must be on its payroll for the 12 months prior to acquisition.
  • Independence: The acquiring company must not have been connected to the target company for at least two years before the acquisition.

2. Target Company Requirements

• • Active business: The target company (or a wholly owned subsidiary) must be carrying on a trade or business in Singapore or overseas on the acquisition date.
  • Minimum staffing: At least three employees must have been employed by the target for the 12 months immediately preceding the acquisition.
  • Flexibility on location: The target does not necessarily need to be incorporated in Singapore.

3. Shareholding 

To qualify, the acquiring company must meet at least one of the following shareholding tests after the acquisition:

• • If it held less than 20% before the deal → it must acquire at least 20% ownership.
  • If it held 50% or less before the deal → it must acquire more than 50% ownership.

*The previously used 75% threshold has been phased out since April 2015

4. Post-Acquisition Compliance

• • The acquiring company must continue to meet eligibility conditions throughout the five-year claim period.
  • If it ceases to meet these conditions in any year, the remaining allowance cannot be claimed from that year onward.
  • No formal requirement exists for aligning financial year-ends between the acquirer and target.

5. Additional Considerations

• • Indirect acquisitions: If the acquisition is made through a wholly owned acquiring subsidiary, additional restrictions apply (e.g. no active business in the subsidiary).
  • Transaction costs: Eligible acquisition expenses (e.g. legal, accounting, valuation) may qualify for double tax deduction, subject to a cap (e.g. S$100,000 per YA).
  • Allowance cap: M&A allowance is based on the qualifying acquisition value, subject to IRAS limits.

How to Leverage the M&A Scheme Strategically

The key to maximising the M&A Scheme lies in planning early. The tax allowance is only granted in the YA following the acquisition, so the structure, ownership, and documentation must be in order before your financial year closes.

If your company is planning an acquisition, consider the following strategies:

1. Plan Ahead of the Financial Year End – Align the acquisition timeline with your accounting year so that you can claim the allowance in the next YA without delay.
2. Document Every Step – Keep detailed records of all professional fees, legal costs, and valuation expenses. These may qualify for the double tax deduction.
3. Integrate Financial Reporting – After the acquisition, synchronising the FYE of both entities can help with reporting and integration. 

For more detailed information on how to qualify, refer to IRAS.

Common Mistakes to Avoid

While the benefits are substantial, several common missteps can cause companies to miss out or face questions from IRAS. Buying dormant entities, or neglecting to maintain operations for two years after the acquisition are among the most frequent pitfalls.

Documentation is another important concern. IRAS may reject your claim if you don’t have the appropriate acquisition agreements, valuation reports, and evidence of business continuity.

The Bottom Line

With tax filing deadlines fast approaching, now is an opportune time to explore whether your business could benefit from the M&A Scheme. For companies seeking to grow through acquisition, it offers a practical, compliant way to offset part of your investment against taxable income. For other tax-saving incentives, check out our article detailing various other options. 

By planning ahead and keeping your records in order, you can turn a strategic business move into a meaningful tax advantage well before November’s submission crunch. And if you’re exploring your options or need expert guidance, our team at Verti is always ready to help. Reach out to contactus@verti.sg or +65 6909 5691.

All information accurate as of 17 October 2025