Order of transfer / claim
These loss items are to be transferred / claimed in the following order:
- Current year unutilised capital allowances
- Current year unutilised trade losses
- Current year unutilised donations
Note: Income subject to tax at the higher rate will be transferred first, followed by the amount subject to tax at a lower rate (subject to the adjustment specified under section 37B of Income Tax Act, if applicable).
What are the items that do not qualify for transfer under the GR system?
- Loss items of foreign branches
- Investment allowances
- Loss items in respect of income wholly exempt from tax (e.g. loss from pioneer trade)
- Loss items in respect of specific categories of activities or trade where there are rules to quarantine the unutilised losses and capital allowances (e.g. income from Finance leases under Section 10D, income from hiring motor vehicle under Section10H of the Income Tax Act etc)
- Loss items of companies who have been given any of the incentives under the Economic Expansion Incentives Act (e.g. investments in new technology company, technopreneur investment incentive scheme and overseas investment & venture capital incentive)
- Unutilised Section 14Q deduction arising in YA 2012 and before
- Dormant companies
Expenses of dormant companies for the current year that remain unutilised as at the end of the year. However, current year unutilised donations may be transferred under the GR system. Find out more about dormant companies.
- Investment holding companies
Current year unutilised losses arising from excess of expenses over investment income of investment holding companies. However, current year unutilised industrial building allowances / land intensification allowances and donations may be transferred under the GR system. Find out more about investment holding companies.
- Section 10E companies
Current year unutilised losses / capital allowances of Section 10E companies. On the other hand, current year unutilised industrial building allowances (with effect from YA 2007), land intensification allowances and donations may be transferred under the GR system. Please refer to the e-Tax Guide “Ascertainment of Income from Business of Making Investment” (81KB).
Group relief for newly incorporated companies
Where the first set of accounts is submitted for a period exceeding 12 months, the losses to be transferred or claimed under group relief should be ascertained after the losses or income of the newly incorporated company have been apportioned to its respective Years of Assessment (YAs).
For example, if the first set of accounts is for the period from 1 Jun 2009 to 31 Dec 2010, the losses should be apportioned to YA 2010 (i.e. 1 Jun 2009 to 31 Dec 2009) and YA 2011 (1 Jan 2010 to 31 Dec 2010).
If the group relief is for YA 2011, only the losses apportioned to this period can be transferred (for transferor) or the amount of losses to be claimed should be restricted to the assessable income apportioned to this period (for claimant).
How much can be transferred?
A transferor company may transfer 100% of its loss items to a claimant company as long as the loss can be absorbed by the claimant company and the shareholding level is maintained at or above 75% throughout the basis period.
Where the ordinary shareholding level had fallen below 75% during the basis period, but is at least 75% on the last day of the basis period for a YA, the amount of loss items allowed to be transferred or claimed is restricted to the amount applicable to the continuous period ending on the last day of that basis period during which the relevant holding company's ordinary shareholding level is maintained at or above 75%.