Who can qualify for GR?

• Be Singapore incorporated companies
• Belong to the same group of companies and maintain 75% shareholding threshold 
• Have the same accounting year end 

What is a group under the GR system?

Two Singapore-incorporated companies are members of the same group if:

• at least 75% of the ordinary share capital in one company is beneficially held, directly or indirectly, by the other

E.g.

OR

• at least 75% of the ordinary share capital in each of the two companies is beneficially held, directly or indirectly, by a third Singapore incorporated company

E.g.                    

In determining ownership under theGR, any holdings by or through non-Singapore incorporated companies will be disregarded.

In other words, where there is a foreign-incorporated company in the ownership chain, shareholdings by the foreign-incorporated company will not be considered for the purpose of determining direct or indirect shareholdings.

Similarly, any direct or indirect shareholdings by an entity which is not a Singapore-incorporated company (e.g. a trade association, an individual, etc.) will also be disregarded.

How to determine 75% ordinary shareholding

The ordinary shareholding must be maintained at or above 75% during the continuous period that ends on the last day of the basis period.

(The basis period for any YA is the period for which the profits of the company are taxed).

There are two tests to apply in determining ordinary shareholding:

• First-level test - Ordinary shareholding requirement
  To pass this test, there has to be ownership of at least 75% of the ordinary share capital in the company. Ordinary shares are all shares issued by a company that carry a right to variable profit participation and exclude shares that carry only a right to fixed dividends.
• Second-level test - Profits and assets available for distribution
  Holders of ordinary shares must also demonstrate that they are beneficially entitled, directly or indirectly, to at least 75% of:
  • any residual profits of the company available for distribution to the company's equity holders and
  • any residual assets of the company available for distribution to the company's equity holders upon winding-up of the company.

(For the purpose of Group Relief, residual profit refer to the profits of the company after deducting any fixed dividends on all shares (including any fixed dividends on ordinary shares and before deducting any non-fixed return on non-commercial loans and any non-fixed dividends on ordinary shares)

(For the purpose of Group Relief, residual assets refer to the net assets of the company upon a notional winding-up, after distribution to commercial loan creditors and shareholders other than ordinary shareholders)

(For the purpose of Group Relief, equity holders include all holders of ordinary shares (i.e. all shares excluding shares that carry only a right to fixed dividends) in the company, as well as any creditors in respect of non-commercial loans.)

Do companies of the same group need to have the same accounting year-end?

Members of the same group must have the same accounting year-end to qualify for a GR.

This requirement is only applicable between a transferor company and claimant company.

Example:
Company A is a transferor and company B is a claimant. Both companies are also related indirectly through company C within the same group. C need not have the same accounting year-end if it is neither transferring its loss items to B nor claiming loss items from A.