Unutilised Items (Losses, Capital Allowances and Donations)

In a particular Year of Assessment (YA), a company may have tax deductions/ capital allowances/ donations that could not be fully utilised as there was insufficient income to setoff against.

Unutilised losses for a particular YA arise when the company has insufficient or no income from other sources to setoff business losses incurred during that YA.

Unutilised capital allowances for a particular YA arise when the capital allowances claimed in that YA cannot be fully utilised due to insufficiency of income or business losses incurred during that YA.

Unutilised donations for a particular YA arises when allowable donations made during the YA is more than the income for that YA.

For unutilised items (losses, capital allowances and donations), companies may:

  1. Carry forward these unutilised items to setoff the income of future YAs;
  2. Carry-back these unutilised items to setoff income earned in the immediate preceding YA; or
  3. Transfer these unutilised items to related companies through group relief.

Carrying Forward Unutilised Items (Losses, Capital Allowances and Donations)

Subject to qualifying conditions, unutilised capital allowances and trade losses can be carried forward indefinitely while unutilised donations can be carried forward for up to 5 YAs*. For more information on donations, please refer to Charities.

The unutilised capital allowances, trade losses and donations can only be deducted against future income if companies satisfy the Shareholding Test. The company is said to have satisfied the shareholding test when there is no substantial change in its shareholders and their shareholdings as at the relevant dates.

Unutilised capital allowances can only be deducted against future income subject to an additional condition that there is no change in the company's principal activities during the relevant dates.

Qualifying Conditions for Deducting Unutilised
Capital AllowancesTrade LossesDonations
Company must satisfy the Shareholding Test.Company must satisfy the Shareholding Test.Company must satisfy the Shareholding Test.
There must be no change in the company's principal activities during the relevant dates.--

*Example: Donations made in YA 2012 can be carried forward until YA 2017. Any balance of the donations not deducted by YA 2017 will be disregarded.

Relevant Dates for Unutilised Capital Allowances

First Date: Last day of the YA in which the capital allowances arose.
Second Date: First day of the YA in which the capital allowances are to be deducted.

YA

2012

Basis Period

1 Oct 2010 - 30 Sep 2011

Capital Allowances unutilised in

YA 2012

Capital Allowances to be utilised in

YA 2017

Relevant Dates for Shareholding Test

31 December 2012  (last day of YA 2012)
1 Jan 2017 (first day of YA 2017)

Relevant Dates for Unutilised Losses/ Donations

First Date: Last day of the year in which the losses or donations were incurred.
Second Date: First day of the YA in which the losses or donations are to be deducted.  

YA

2012

Basis Period

1 Oct 2010 - 30 Sep 2011

Losses/ donations unutilised in

YA 2012

Losses/ donations to be utilised in

YA 2017

Relevant Dates for Shareholding Test

31 December 2011 (last day of year 2011)
1 Jan 2017 (first day of YA 2017)

Determining “Substantial Change” in Shareholders

Shareholders refer to shareholders of the ultimate holding company (where applicable).To determine whether there is substantial change in shareholders:

Step 1:
Identify the two relevant dates (as explained above).

Step 2:
Identify the shareholders that have shareholdings on both relevant dates.

Step 3:
Identify the total number of shares held by these shareholders on each relevant date.

Step 4:
Express the shares owned by these shareholders collectively as a percentage over the total number of shares on each relevant date.

If the percentage of shareholding of the common shareholders as at these two relevant dates are 50% or more, there is no substantial change in shareholders and their shareholdings. Otherwise, it is regarded as having a substantial change in shareholders and their shareholdings.

Examples on Shareholding Test

Company A wishes to claim its unutilised capital allowances and losses brought forward from YA 2012 against its assessable income for YA 2017. Company A's basis period is 1 Oct 2010 - 30 Sep 2011.

 Number of Shares as at

Shareholders

31 Dec 2011

31 Dec 2012

1 Jan 2017

A

15

10

10

B

45

50

-

C

40

40

40

D

-

-

50

Total

100

100

100

Unutilised Capital Allowances

The Shareholding Test is satisfied as explained in the table below.

Relevant Dates for Claiming Unutilised Capital AllowancesShareholders in Common on Both Relevant Dates% of Shareholding of Common Shareholders

Last day of the YA in which the CAs arose:
31 Dec 2012

Shareholder A and Shareholder C

50%
[(10 + 40) / 100]

First day of the YA in which the CAs are to be deducted:
1 Jan 2017

50%
[(10 + 40) / 100]

The common shareholders at the relevant dates are A and C. There is no substantial change in the shareholders of the company as the common shareholders A and C hold at least 50% of the total number of shares in the company as at the relevant dates. The company can therefore claim the unutilised capital allowances for YA 2012 against its income for YA 2017 provided there is no change in the company's principal activities during the two relevant dates.

Unutilised Losses

The Shareholding Test is satisfied as explained in the table below.

Relevant Dates for Claiming Unutilised LossesShareholders in Common on Both Relevant Dates% of Shareholding of Common Shareholders

Last day of the year in which the losses were incurred:
31 Dec 2011

Shareholder A and Shareholder C

55%
[(15 + 40) / 100]

First day of the YA in which the losses are to be deducted:
1 Jan 2017

50%
[(10 + 40) / 100]

The common shareholders at the relevant dates are A and C. There is no substantial change in the shareholders of the company as the common shareholders A and C hold 50% or more of the total number of shares in the company as at the relevant dates. The company can therefore claim the unutilised losses for YA 2012 against its income for YA 2017.

Company B wishes to claim its unutilised capital allowances and losses brought forward from the YA 2012 against its assessable income for YA 2017. Company B's basis period is 1 Jan 2011 - 31 Dec 2011.

  Number of Shares as at    

Shareholders

31 Dec 2011

31 Dec 2012

1 Jan 2017

A

30

30

30

B

30

70

10

C

40

-

-

D

-

-

60

Total

100

100

100

Unutilised Capital Allowances

The Shareholding Test is not satisfied as explained in the table below.

Relevant Dates for Claiming Unutilised Capital AllowancesShareholders in Common on Both Relevant Dates% of Shareholding of Common Shareholders

Last day of the YA in which the CAs arose:
31 Dec 2012

Shareholder A and Shareholder B

100%
[(30 + 70) / 100]

First day of the YA in which the CAs are to be deducted:
1 Jan 2017

40%
[(30 + 10) / 100]

The common shareholders at the relevant dates are A and B. There is a substantial change in the shareholders of the company as the common shareholders A and B hold less than 50% of the total number of shares in the company as at 1 Jan 2017. The company cannot claim for unutilised capital allowances for YA 2012 against its income for YA 2017.

Unutilised Losses

The Shareholding Test is not satisfied as explained in the table below.

Relevant Dates for Claiming Unutilised LossesShareholders in Common on Both Relevant Dates% of Shareholding of Common Shareholders

Last day of the year in which the losses were incurred:
31 Dec 2011

Shareholder A and Shareholder B

60%
[(30 + 30) / 100]

First day of the YA in which the losses are to be deducted:
1 Jan 2017

40%
[(30 + 10) / 100]

The common shareholders at the relevant dates are A and B. There is a substantial change in the shareholders of the company as the common shareholders A and B hold less than 50% of the total number of shares in the company as at 1 Jan 2017. The company cannot claim for unutilised losses for YA 2012 against its income for YA 2017.

Waiver of Shareholding Test

The company may apply for waiver of the shareholding test if there is a substantial change in the shareholders of the company.

To grant the waiver, the Comptroller of Income Tax has to be satisfied that the substantial change in shareholders is not for deriving any tax benefit or obtaining any tax advantage.

Claiming Unutilised Items Carried Forward

If the company satisfies the qualifying conditions explained in the preceding paragraphs, it may claim the unutilised items (losses, capital allowances and donations) brought forward from previous YAs. To claim unutilised losses, capital allowances and donations brought forward, you must 

  1. Fill in the unutilised amount brought forward from previous YA(s) and the unutilised amount to be carried forward in your Income Tax Return. For details, please refer to Guidance on Completing Form C-S/ C; and
  2. Show, in the tax computation, the claim for unutilised losses, capital allowances and donations brought forward and the computation of the unutilised amount to be carried forward for subsequent YAs.

Order of Claiming the Deductions

When claiming, the amounts must be deducted against the current year income in the following order:

  1. Unutilised capital allowances* (starting with the capital allowances from the earliest YA)
  2. Current year capital allowances*
  3. Unutilised losses from previous years* (starting with the losses from the earliest YA)
  4. Unutilised donations from previous years (starting with the donations from the earliest YA, subject to a maximum of 5 years before the current YA)
  5. Current year donations

* To claim against trade income first before income from other sources

Use the Basic Corporate Tax Calculator

You can refer to the Basic Corporate Tax Calculator to help you prepare your tax computation and Form C-S/ C and to work out the amount of unutilised losses, capital allowances and donations you can carry forward to future YAs.

Loss Carry-Back Relief for Unutilised Items

Effective YA 2006, companies may also carry back current year unutilised capital allowances and trade losses to setoff the income from the immediate YA preceding that YA in which the capital allowances were granted and trade losses were incurred, subject to a maximum cap of $100,000*.   

For example, YA 2017 capital allowances and trade losses can be carried back to setoff YA 2016's income, subject to a cap of $100,000.

For more details, please refer to Loss Carry-Back Relief.

Group Relief for Unutilised Items

From YA 2003, companies may transfer current year unutilised trade losses, capital allowances and donations of one company from the assessable income of another company in the same group.

For more details, please refer to Group Relief.

  • There is no substantial change in the shareholders of my company. Why hasn’t IRAS allowed my claim for unutilised capital allowances?

    Your company must satisfy two conditions to make use of unutilised capital allowances arising in previous YAs:

    1. There is no substantial change in shareholders and their shareholdings as at the relevant dates; and
    2. There must be no change in principal activities as at the relevant dates.

    Hence, your company's unutilised capital allowances may have been disregarded by IRAS because your company did not satisfy the second condition.

  • Can I claim unutilised losses and capital allowances if there is a substantial change in the shareholders of my company?

    No, you cannot claim unutilised losses and capital allowances when there has been a substantial change in your company's shareholders. 

    However, your company can apply for a waiver of the shareholding test under Section 37(16) of the Income Tax Act (ITA) for unutilised losses and Section 23(5) for unutilised capital allowances if the substantial change is due to the following:

    1. Genuine commercial reasons not for the purpose of deriving any tax benefit or obtaining any tax advantage;
    2. Nationalisation;
    3. Privatisation of government-owned enterprise; or
    4. Stocks of the company or that of its holding parent company being publicly listed and traded in a recognised Stock Exchange.

    To apply for a waiver of the shareholding test, please refer to our e-Tax guide on Utilising Unabsorbed Capital Allowances, Trade Losses and Donations for details of the information that your company should provide for IRAS' review. 

    A timely application would make it easier for your company to retrieve relevant records to support your application for the waiver of the shareholding test. As such, your company may submit the application for a waiver of the shareholding test even if you are not in the position to utilise the unutilised items.

    Please submit your application to:
    Inland Revenue Authority of Singapore
    55 Newton Road
    Revenue House
    Singapore 307987

     

  • Must a company be in a profit position before it can submit an application for a waiver of the shareholding test?

    No, the application for a waiver of the shareholding test can be submitted when a substantial change in shareholders occurs.

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