GST on Business Transfers: Understanding 'Transfer of a Going Concern' (TOGC) and Other Excluded Transactions

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Oct 6
6 min read

GST: Business Transfer Exclusions Explained

GST on Business Transfers: Understanding 'Transfer of a Going Concern' (TOGC) and Other Excluded Transactions

When selling a business, the transfer of its assets would ordinarily be a taxable supply subject to Goods and Services Tax (GST). However, to prevent a cash flow disadvantage for the buyer (who would have to pay GST upfront and then claim it back later) and to facilitate business restructuring, a critical exception exists: the Transfer of a Business as a Going Concern (TOGC).

In Singapore, if a business transfer qualifies as a TOGC, the transaction can be treated as an Excluded Transaction under the GST legislation. This means the supply of assets is considered neither a supply of goods nor a supply of services, effectively placing it outside the scope of GST and resulting in no GST charge on the sale.

What is a Transfer of a Going Concern (TOGC)?

A TOGC is not merely a sale of individual assets; it's the transfer of a fully operational business (or an independent part of it) that the buyer intends to continue running. The effect of the transfer must be to put the new owner in possession of a business which can be operated as such and without interruption.

Conditions for a TOGC to be an Excluded Transaction

For the transfer of assets in a business sale to qualify as an excluded transaction, all of the following conditions must be met:

Transfer of Business, Not Just Assets: The supply of assets must be made in relation to a transfer of the business (or an independent part of that business). It must have the effect of putting the transferee in possession of a functional business.
Continuity of Business Type: The assets transferred must be intended for use by the buyer in carrying on the same kind of business as the seller.
Part of Business Must be Independent: If only a part of the business is transferred, that part must be capable of being operated independently.
Business Continuity: The business must be a "going concern" at the time of transfer, meaning there should be continuity of the business with no immediate termination, save for temporary closures necessary for the handover.
GST-Registered Transferee: Where the transferor is a taxable person (GST-registered), the buyer (transferee) must be already, or immediately become, a GST-registered person as a result of the transfer.

Key Action: To mitigate risk, the parties should clearly document in the Business Transfer Agreement their intention to treat the transaction as a TOGC and include warranties that the conditions for an excluded transaction have been met.

Other Excluded Transactions

Beyond the TOGC provision, the GST (Excluded Transactions) Order in Singapore specifies a few other scenarios that are similarly treated as neither a supply of goods nor a supply of services, and thus not subject to GST. These include:

1. Transfer or Assignment of Hire-Purchase Finance

This covers the situation where a provider of hire-purchase finance (e.g., a financial institution) transfers or assigns their title to goods comprised in a hire-purchase agreement, together with the right to receive the hire-purchase finance payments, to another financier.

2. Transfer of Qualifying Income Tax Deductions (Group Relief)

Where a person transfers any qualifying deduction (like unutilised capital allowances or trade losses) to another company belonging to the same group under the Income Tax Group Relief system, this transfer is also an excluded transaction for GST purposes.

Consequences of Incorrect Treatment

The correct classification of a business transfer is critical, as the risk of error largely falls on the seller (transferor).

Scenario	Consequence
Incorrectly Treated as Excluded (No GST Charged)	If the transfer does not meet the TOGC conditions: GST will be retrospectively due from the seller to the tax authority on the value of the assets. The seller may also face interest and penalties for late payment.
Incorrectly Treated as Taxable (GST Charged)	If the seller charges GST on a transaction that did qualify as a TOGC: The buyer will generally not be able to recover the GST paid from the tax authority, as no tax was technically chargeable. The seller would need to seek a refund from the tax authority and refund the tax to the buyer.

💡 Takeaway

The TOGC exclusion is a powerful tool in tax planning for mergers, acquisitions, and restructuring exercises, but businesses must ensure they satisfy every condition to leverage the GST-free nature of the transfer. Detailed documentation and expert tax advice are essential to avoid costly penalties.

Unlock GST Savings on Business Transfers: How Bestar Singapore Provides Expert TOGC Advisory

GST on Business Transfers: Understanding 'Transfer of a Going Concern' (TOGC) and Other Excluded Transactions

Navigating the complexities of GST during a business sale or acquisition is one of the most critical challenges facing companies in Singapore. A misstep in classifying the transaction—especially concerning the Transfer of a Business as a Going Concern (TOGC)—can lead to unexpected tax liabilities, penalties, and a costly reversal of the deal structure.

Bestar Singapore specializes in providing the precise tax and compliance expertise needed to ensure your business transfer is executed efficiently, legally, and most importantly, with the correct GST treatment.

Here is how Bestar Singapore's expert GST advisory services can help you secure the tax-free benefits of a TOGC and ensure compliance on all other excluded transactions.

1. Pre-Acquisition GST Due Diligence and TOGC Qualification

The single biggest risk in a business transfer is assuming the transaction qualifies as a TOGC when it does not. The IRAS has strict, multi-faceted conditions that must be met.

How Bestar Helps:

Condition Assessment: We conduct a meticulous review of the transaction details against all five TOGC conditions (e.g., business continuity, transfer of a functional unit, same kind of business). We provide a clear opinion on whether the transaction will likely be treated as an Excluded Transaction (i.e., tax-free).
Asset Categorisation: We go beyond the surface, analysing which specific assets, contracts, and employees are being transferred to confirm that the bundle constitutes a "going concern" and not a mere collection of individual assets.
Risk Mitigation: If there are grey areas, we advise on the commercial changes or contractual clauses needed to strengthen the TOGC claim, minimizing the risk of an IRAS audit and retrospective GST liability.

2. Strategic GST Registration and Transferee Compliance

A key condition for a TOGC exclusion is that the buyer (transferee) must be, or immediately become, a GST-registered person.

How Bestar Helps:

Timely GST Registration: We manage the compulsory or voluntary GST registration process for the transferee company. For non-registered buyers, we ensure their application is processed and approved before the transfer date to satisfy the "immediately becomes a taxable person" requirement.
Transferor De-registration: We advise the seller (transferor) on the correct procedure for GST de-registration after the sale, including the filing of the final GST return (Form 8 and 9) to ensure a smooth exit from the GST regime.

3. Documentation and Contractual Assurance

The IRAS relies heavily on documentation. A robust Business Transfer Agreement (BTA) that explicitly addresses GST treatment is vital to protect both parties.

How Bestar Helps:

Contractual Review: We review and recommend specific GST clauses for your BTA, ensuring it clearly states the parties' intention to treat the sale as a TOGC and outlines the indemnities and warranties should the classification be successfully challenged by the IRAS.
Mandatory Record-Keeping: We guide both the buyer and seller on the IRAS-mandated record-keeping requirements for all transferred assets, ensuring easy reconciliation of asset values and future audit readiness.

4. Input Tax Claim Advisory on TOGC-Related Expenses

Even when a transfer is an excluded transaction, GST is still incurred on professional fees (legal, advisory, accounting) related to the sale.

How Bestar Helps:

Input Tax Optimisation: We advise the transferor on correctly treating GST incurred on transaction costs (TOGC Expenses) as general overheads, allowing for the maximum possible input tax claim and optimizing cash flow during the deal.

5. Guidance on Other Excluded Transactions

Beyond TOGC, Bestar provides clarity on other excluded transactions that often arise during corporate restructuring.

How Bestar Helps:

Group Relief and Hire-Purchase: We advise on the GST implications of transferring qualifying income tax deductions under Income Tax Group Relief or the assignment of hire-purchase finance, ensuring these are correctly treated as excluded transactions.

Your Partner for Tax-Efficient Business Transfers

Don't let the fear of penalties or retrospective tax liabilities derail your business transfer. By partnering with Bestar Singapore, you gain access to seasoned GST specialists who will validate your transaction's structure and manage all compliance requirements.

Contact Bestar today to secure your GST-free Transfer of a Going Concern and ensure complete peace of mind.