New digital process supports applications for waiver of the shareholding test, while updated guidance reiterates rules on carry-forward, carry-back relief, and Group Relief for unutilised items.
Singapore’s Inland Revenue Authority of Singapore (IRAS) has introduced FormSG for Waiver of Shareholding Test Applications, alongside updated guidance on the treatment of Unutilised Items, including capital allowances, trade losses, and donations.
Unutilised items arise in a Year of Assessment (YA) where a company has insufficient income to fully utilise deductions. Companies may manage these amounts through three mechanisms: carry-forward to future YAs, carry-back relief to the immediate preceding YA (capped at SGD 100,000 for capital allowances and trade losses), or transfer under Group Relief to related entities.
Under existing rules, unutilised capital allowances and trade losses may be carried forward indefinitely, while unutilised donations are limited to a carry-forward period of up to five YAs. To qualify for carry-forward, companies must generally satisfy the shareholding test, which requires at least 50% commonality in shareholders and their shareholdings between relevant dates. In addition, a same business test applies to unutilised capital allowances.
IRAS confirmed that companies may apply for a waiver of the shareholding test for unutilised trade losses and unutilised capital allowances where changes in ownership are due to genuine commercial reasons and not for the purpose of deriving any tax benefit or obtaining any tax advantage. Other qualifying circumstances include nationalisation, privatisation of a government-owned enterprise, or where the stocks of the company or its holding parent company are publicly listed and traded on a recognised Stock Exchange.
Applications for such waivers must now be submitted via FormSG.
The updated guidance also reiterates the prescribed order of deduction when offsetting unutilised items against current year income. Companies must first deduct unutilised capital allowances (from the earliest YA), followed by current year capital allowances, unutilised trade losses (earliest first), unutilised donations (within the five-year limit), and finally current year donations.
For compliance, companies are required to disclose amounts brought forward and carried forward in their Corporate Income Tax Return, with supporting tax computations detailing claims and remaining balances.
