A stamp duty is the duty imposed when one purchases shares in a firm, be it public or private, or any immovable property in Singapore.
The Stamp Duties Act is the principal statute in Singapore that governs the application and scope of stamp duty. The Act’s First Schedule lists the precise dutiable papers subject to stamp duty.
In private limited firms, share transfers are highly prevalent. For various reasons, Shareholders may choose to sell their stocks at any time. When transferring shares, shareholders must follow the correct procedures and pay the appropriate stamp duty.
Unlike during an assignment of shares, stamp duties must be paid to the Singapore Inland Revenue Authority (IRAS) for a share transfer. Because transferring the shares of a private corporation is more complex than selling them on the open market, it’s essential to have a basic grasp of the process.
What is Stamp Duty for Share Transfer?
When you buy shares, you must pay stamp duties on the paperwork for the shares to be transferred to you. This is payable based on the actual transacted price or the market value of the shares, whichever is higher. The current rate for such a stamp duty is 0.2%.
On what Documents is Stamp Duty PayableTransfer of Share Document
Transfer of Share Document
For the transfer or acquisition of shares, a transfer of share document has to be signed.
The buyer or transferee must pay a stamp duty of 0.2% on the shares’ purchase price or net asset value (NAV) (whichever is higher).
No stamp duty is due on the transfer of scriptless shares because no physical paperwork is executed for such a procedure.
Mortgage for Share Document
When you transfer your shares to the bank to secure a loan, you are required to sign a document known as a share mortgage.
The mortgagor must pay stamp duty on the loan amount in question. The stamp duty is calculated at 0.4% of the loan amount, with a cap of SGD 500.
Who Needs to Pay the Stamp Duty?
The transferor, as well as the transferee, typically stipulates who is responsible for paying the stamp duty, and this will be indicated in the agreement. However, if the agreement does not specify who is responsible for paying the relevant stamp duty, the transferee will automatically be liable for paying it under the Stamp Duties Act’s Third Schedule.
How to Pay the Stamp Duty?
While you can settle any e-stamp transactions at Service Bureaus within approved SingPost locations or Taxpayer and Business Service Centre, the most convenient way of payment is through the online IRAS e-stamping website.
You can pay your stamp duty online by following the procedure below:
1st Step: Logging In
You’ll need your SingPass credentials to access the site. Use the QR code feature on your SingPass mobile app or manually fill in your login and password.
If this is your first time using the e-stamping site, you will be asked to provide your personal information (i.e., e-stamping portal username, address, phone number, and email).
2nd Step: To pick the relevant Stamp Duty, go to the Main Banner and Choose ‘Stamping’
You should be directed to the main e-Stamping Portal page after you have checked in. In the main menu, go to ‘Stamping’ and select the type of stamp duty you’ll have to pay.
3rd Step: Fill Up Your Information
Fill in the relevant boxes with your personal information, document details, and information about your property.
To calculate your stamp duty costs, click ‘CALCULATE’ once you’ve finished filling in your form.
To go on to the following stage, select ‘Preview & Declare’.
4th Step: Check Your Document
Check the information you’ve entered at least twice. Once you’ve double-checked it, click the ‘MAKE PAYMENT’ option at the bottom of the page.
A pop-up window will open, prompting you to click ‘YES’ to proceed with the payment. You should select ‘YES’ if you are ready to make payment.
5th Step: Choose a Payment Method
If you haven’t already done so, deactivate your pop-up blockers and install Adobe Acrobat Reader at this point. You will be prompted to select a payment method.
The following methods of digital payment are available:
- FAST via DBS/POSB (only applicable for conveyancing documents)
- Internet Banking Fund Transfer
- Telegraphic Transfer
- AXS Stations
Otherwise, choose ‘Other Modes with Payment Slip’ to get a payment slip that you may use to pay by another method.
6th Step: Complete the Payment
After you have decided how you want to pay for your stamp duty, you will be required to provide your bank account information. After that, you’ll be directed to a page with your document reference number and property information.
Before agreeing to the payment disclaimer, double-check that the information is correct. Then, to complete your payment, click ‘PAY.’
Print or save an electronic copy of your transaction once it has been properly processed. You may use your document reference number to recover your completed form at a later time.
And that’s all there is to it! You have successfully paid your stamp duty via the IRAS e-stamping site.
Penalties for Non-compliance
A document must be stamped before it can be signed. However, if you sign and stamp a document (together with any necessary payment) within the following time frame, you will not be penalised:
- If the document is signed in Singapore, it must be returned within 14 days.
- If the document is signed outside of Singapore, it must be returned within 30 days after it has been obtained in Singapore.
If you do not pay by the due date, the IRAS may take the following actions:
- Impose a penalty.
- To reclaim the overdue duty, appoint agents such as your bank, employer, tenant, or lawyer (who is overseeing the sale of your properties).
- Issues a Travel Restriction Order (TRO) to prevent you from leaving Singapore.
- Take legal action if necessary.
The above list is not the end of it all.
Even if you have filed an objection and are awaiting the verdict, you must pay the Stamp Duty by the payment due date. Any excess payment will be returned if the assessment is later amended.
Payment Delay of No More Than 3 Months
A penalty of $10 or the amount due, whichever is higher, will be imposed for late payments of less than three months.
Payment Delay for More Than 3 Months
For late payments of more than three months, a penalty of $25 or four times the duty owed, whichever is higher, will be imposed.
If you or your company needs to transfer shares, you must first ensure that the shareholders follow the proper procedures for the transfer to be executed properly. Following that, you should be able to confidently advise your shareholders on all obligations related to share transfer and stamp duties.
To ensure the whole process is smooth, you can contact us to manage share transfer and everything else associated with it. In addition, our knowledgeable tax consultants would be able to guide you throughout the process to guarantee you stay compliant and pay the correct amount of stamp duty for the share transfer.