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:
- Carry forward these unutilised items to setoff the income of future YAs;
- Carry-back these unutilised items to setoff income earned in the immediate preceding YA; or
- 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 Donation and Tax Deduction.
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 |
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Capital Allowances | Trade Losses | Donations |
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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. | - | - |
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 | 2015 |
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Basis Period | 1 Oct 2013-30 Sep 2014 |
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Capital Allowances unutilised in | YA 2015 |
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Capital Allowances to be utilised in | YA 2020 |
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Relevant Dates for Shareholding Test | 31 December 2015 (last day of YA 2015)
1 Jan 2020 (first day of YA 2020) |
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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 | 2015 |
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Basis Period | 1 Oct 2013 - 30 Sep 2014 |
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Losses/ donations unutilised in | YA 2015 |
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Losses/ donations to be utilised in | YA 2020 |
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Relevant Dates for Shareholding Test | 31 December 2014 (last day of year 2014)
1 Jan 2020 (first day of YA 2020) |
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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 2015 against its assessable income for YA 2020. Company A's basis period is 1 Oct 2013 - 30 Sep 2014.
| Number of Shares as at |
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Shareholders | 31 Dec 2014 | 31 Dec 2015 | 1 Jan 2020 |
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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 Allowances | Shareholders in Common on Both Relevant Dates | % of Shareholding of Common Shareholders |
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Last day of the YA in which the CAs arose: 31 Dec 2015 | Shareholder A and Shareholder C | 50%
[(10 + 40) / 100] |
First day of the YA in which the CAs are to be deducted: 1 Jan 2020 | 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 2015 against its income for YA 2020 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 Losses | Shareholders in Common on Both Relevant Dates | % of Shareholding of Common Shareholders |
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Last day of the year in which the losses were incurred: 31 Dec 2014 | Shareholder A and Shareholder C | 55%
[(15 + 40) / 100] |
First day of the YA in which the losses are to be deducted: 1 Jan 2020 | 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 2015 against its income for YA 2020.
Company B wishes to claim its unutilised capital allowances and losses brought forward from the YA 2015 against its assessable income for YA 2020. Company B's basis period is 1 Jan 2014 - 31 Dec 2014.
| Number of Shares as at |
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Shareholders | 31 Dec 2014 | 31 Dec 2015 | 1 Jan 2020 |
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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 Allowances | Shareholders in Common on Both Relevant Dates | % of Shareholding of Common Shareholders |
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Last day of the YA in which the CAs arose: 31 Dec 2015 | Shareholder A and Shareholder B | 100%
[(30 + 70) / 100] |
First day of the YA in which the CAs are to be deducted: 1 Jan 2020 | 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 2020. The company cannot claim for unutilised capital allowances for YA 2015 against its income for YA 2020.
Unutilised Losses
The Shareholding Test is not satisfied as explained in the table below.
Relevant Dates for Claiming Unutilised Losses | Shareholders in Common on Both Relevant Dates | % of Shareholding of Common Shareholders |
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Last day of the year in which the losses were incurred: 31 Dec 2014 | Shareholder A and Shareholder B | 60%
[(30 + 30) / 100] |
First day of the YA in which the losses are to be deducted: 1 Jan 2020 | 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 2020. The company cannot claim for unutilised losses for YA 2015 against its income for YA 2020.
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
- 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
- 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:
- Unutilised capital allowances* (starting with the capital allowances from the earliest YA)
- Current year capital allowances*
- Unutilised losses from previous years* (starting with the losses from the earliest YA)
- Unutilised donations from previous years (starting with the donations from the earliest YA, subject to a maximum of 5 years before the current YA)
- Current year donations
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
Companies may also carry back current year unutilised capital allowances and trade losses to set off 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 2019 capital allowances and trade losses can be carried back to setoff YA 2018's income, subject to a cap of $100,000.
To help businesses with their cash flow, it
was announced in Budget 2020 that the Loss Carry-back Relief will be enhanced
for YA 2020 as follows:
- The number of YAs to which unutilised CAs and trade losses from
YA 2020 can be carried back will be increased from one YA to three YAs
immediately preceding YA 2020 (i.e. YA 2017, YA 2018 and YA 2019) (“enhanced
carry-back relief”)
- Businesses may elect for the enhanced carry-back relief based on an estimate of the current year unutilised CAs and trade losses for YA 2020.
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.