On 31 Mar 2023, the Inland Revenue Authority of Singapore has released the eighth edition of the e-Tax Guide on the Carry-Back Relief System. This updated guide provides important information for individuals and businesses that have unabsorbed capital allowances (CA) or trade losses in their trade, business, profession, or vocation for the current year. Under section 37D of the Income Tax Act (ITA), the carry-back relief system allows individuals and businesses, including sole-proprietorships and partnerships, to carry back their current year qualifying deductions (QD) and deduct them from their assessable income of the immediately preceding year of assessment (YA). Under the system, a person may carry back its current year qualifying deductions (“QD”) and deduct them against its assessable income of the immediate preceding YA. For YAs 2020 and 2021, a person may elect to carry back QD and deduct them against its assessable income for up to three YAs immediately preceding the relevant YA of loss (i.e. YA 2017, YA 2018 and YA 2019 where the YA of loss is YA 2020, and YA 2018, YA 2019 and YA 2020 where the YA of loss is YA 2021) (referred to as “enhanced carry-back relief” in this e-Tax Guide2). To ease businesses’ cash flow, a person may also elect for carry-back relief or enhanced carry-back relief based on an estimate of the QD for YAs 2020 and 2021.

Refer to the e-Tax Guide on “Enhanced Carry-back Relief System” (Fourth Edition) published on 5 March 2021 for more details on the enhanced carry-back relief for YAs 2020 and 2021. The maximum amount of QD that can be carried back is capped at $100,000. The QD will be deducted in the following order: (i) current year’s unabsorbed CA, if any, (ii) current year’s trade losses, if any. The carry-back of unabsorbed CA is subject to the “same business” test. A company will have to satisfy the shareholding test as well. A company can elect to carry back its QD after transferring its loss items under the group relief system3, if applicable.

Overall, this updated e-Tax Guide on the Carry-Back Relief System provides important details and guidelines for individuals and businesses in Singapore to effectively utilize the carry-back relief scheme and ease their tax obligations.