In a corporate amalgamation, the amalgamated company takes over all assets and liabilities of the amalgamating companies, and the amalgamating companies cease to exist. The amalgamated company can either have a new name, retain the same name or adopt the name of one of the amalgamating companies.

A court order was previously required for an amalgamation to take effect. However, from January 2006, a court order is no longer mandatory due to newly introduced provisions in the Companies Act (Cap. 50). Sections 215A to 215J of the Companies Act to allow voluntary amalgamation of companies, including holding companies and their subsidiaries, without the need for an order. The amalgamation proposal must be approved by shareholders by special resolution in a general meeting of each amalgamating company, and supported by solvency statements in relation to the amalgamating company and of the amalgamated company, made by the board of directors of each amalgamating company.

The directors of each amalgamating company are also required to send a copy of the amalgamation proposal to each secured creditor of the company and publish a notice of the proposed amalgamation in at least one daily English newspaper circulating generally in Singapore. The court may modify or injunct the amalgamation if, on application by a shareholder or creditor of the amalgamating company, it is shown that the amalgamation would unfairly prejudice a shareholder or a creditor of an amalgamating company. The procedures are relatively simpler for amalgamation of a holding company and any one or more of its wholly owned subsidiaries, or between two or more wholly-owned subsidiaries of the same corporation, subject to solvency requirements.

The above steps make amalgamation a convenient procedure in corporate restructuring especially if the directors are confident that there would not be an objecting shareholder or creditor to the amalgamation proposal.

Under the existing tax treatment, when assets and liabilities are transferred upon amalgamation, tax consequences are often triggered as the amalgamating companies are treated as having ceased business and disposed of their assets and liabilities, and the amalgamated company having acquired or commenced a new business. So, for instance, assets such as plant and machinery are treated to have been sold by the amalgamating companies to the amalgamated company and balancing adjustments have to be made. Bad and doubtful debts taken over by the amalgamated company are neither deductible nor taxable in the hands of the amalgamated company, if the amalgamated company subsequently writes off or recovers the debt respectively.

To make it easier for companies to undergo restructuring of their operations, Inland Revenue Authority of Singapore ("IRAS") will be introducing a tax framework for qualifying corporate amalgamations. It is aimed at minimising the tax consequences arising from amalgamation. This framework will apply to qualifying corporate amalgamations where, amongst other conditions, the amalgamated company takes over all assets and liabilities of the amalgamating companies and the amalgamating companies cease to exist. A consultation paper has been released by IRAS to seek views on this new tax framework for qualifying corporate amalgamations.

1. the specified foreign income must have been subjected to tax in the foreign jurisdiction from which the income is received (The rate at which the foreign income was taxed can be different from the headline tax rate); and

2. at the time the specified foreign income is received in Singapore, the highest corporate tax rate (headline tax rate) of the foreign jurisdiction from which the income is received is at least 15%.

The Budget provides that that the conditions that are currently required for foreign-sourced income to be exempted from tax when remitted to Singapore, would be temporarily lifted. Businesses will therefore be exempt from tax on the foreign-sourced income that they remit between 22 Jan 2009 to 21 January 2010 (both dates inclusive), provided that the remitted foreign-sourced income is earned or accrued outside Singapore on or before 21 January 2009. The desired outcome from this measure is that businesses can make best use of all their sources of funds (including foreign-sourced income such as foreign interest, rental or royalty income) to meet their business financing needs in Singapore during this time of credit tightness.

The Corporate Income Tax rate for companies will also be reduced from 18% to 17%. This reduction will take effect from the Year of Assessment 2010. This would translate into additional savings for companies in the current economic climate.