Advance Ruling Summary No. 7/2026 confirms that unabsorbed capital allowances and losses may be set off by the amalgamated company where the same trade or business continues, subject to conditions under the Income Tax Act 1947.
The Inland Revenue Authority of Singapore issued Advance Ruling Summary No. 7/2026 on 4 May 2026, setting out income tax considerations for company amalgamations.
It explains that unabsorbed capital allowances and losses of a company (the amalgamating company) transferred to another company (the amalgamated company) may be set off against the income of the amalgamated company. This applies where the income is derived from the same trade or business previously carried on by the amalgamating company.
The ruling concerns an amalgamation between two Singapore-incorporated entities, Company A and Company B, and outlines how unabsorbed losses are treated in such cases.
Background and transaction
Company A (the amalgamated company) carries on investment holding and provides business support services to subsidiaries and related companies.Company B (the amalgamating company) provides business support services to related companies.
Under the plan, Company B will be amalgamated into Company A in accordance with section 215F of the Companies Act 1967. After the amalgamation, Company A will assume Company B’s contracts and employees and continue providing the same business support services, generating service fee income.
The ruling
The Comptroller confirmed that unabsorbed capital allowances and losses (referred to as “Unabsorbed Tax Loss Items”) transferred from Company B may be deducted against Company A’s income.
Key reason
The decision is based on the view that Company A will continue the same trade or business previously carried on by Company B. As the post-amalgamation income arises from that same trade, the set-off is allowed under section 34C(25) of the Income Tax Act (ITA) 1947.
Conditions and limitations
The ruling applies only if the requirements in sections 34C(23) and 34C(24) of the ITA, as well as the Income Tax (Amalgamation of Companies) Regulations 2011, are met.
It is binding only on the applicant and the specific transaction described. The Comptroller is not obliged to apply the same treatment to other taxpayers in similar situations.
