Loss Carry-Back Relief

Clubs, trade associations, management corporations and town councils may carry-back unutilised capital allowances (CAs) and trade losses to reduce the amount of taxes payable over a fixed period of time.

Background of the scheme

To help small businesses cope with cash-flow problems especially in cyclical downturns, a one-year carry-back of current year unutilised CAs and trade losses was introduced from YA 2006.

To help businesses with their cash flow, it was announced in Budget 2020 that the Loss Carry-back Relief will be temporarily enhanced for YA 2020 as follows:

1.  Business may elect to carry back unutilised CAs and trade losses from YA 2020 up to three YAs immediately preceding YA 2020 (i.e. YA 2017, YA 2018 and YA 2019) (“YA 2020 enhanced carry-back relief”). 

2. Businesses may elect for the current or enhanced carry-back relief based on an estimate of the current year unutilised CAs and trade losses for YA 2020.

Please refer to the e-Tax Guide on Enhanced Carry-back Relief System (PDF, 413KB) for more information on the Loss Carry-back Relief for YA 2020.  

New! As announced in Budget 2021, the enhanced carry-back relief will be extended to YA 2021 as follows:  

  1. Businesses may elect to carry back unutilised CAs and trade losses from YA 2021 up to three YAs immediately preceding YA 2021 (i.e. YA 2018, YA 2019 and YA 2020) (“YA 2021 enhanced carry-back relief”) 
  2. Businesses may elect for the current or enhanced carry-back relief based on an estimate of the current year unutilised CAs and trade losses for YA 2021. 

Main Features of Loss-Carry Back Relief

1.  Current year unutilised CAs and trade losses are allowed (collectively referred to as “Qualifying Deductions” or “QD”) to be carried back for one  YA or three YAs (for YA 2020 and YA 2021 enhanced carry-back relief) immediately preceding that YA in which the CAs are granted or the trade losses incurred;

2. A maximum amount of $100,000 of current year QD can be carried back;

3. The current requirements for carrying forward QD will apply in the same way when these amounts are carried back, i.e., carry on the same trade or business.

4. The carry-back will be given on due claim.

5. For the purpose of carrying back the QD under the enhanced carry-back relief, the carry-back shall be made in the following order: 

YA 2020

i. Firstly, to the third YA immediately preceding YA 2020 (i.e. YA 2017);

ii. Secondly, where there are QD remaining after (i), the balance will be carried back to the second YA immediately preceding YA 2020 (i.e. YA 2018); and

iii. Finally, where there are QD remaining after (ii) above, the balance will be carried back to the YA immediately preceding YA 2020 (i.e. YA 2019). 

YA 2021

i. Firstly, to the third YA immediately preceding YA 2021 (i.e. YA 2018); 

ii. Secondly, where there are QD remaining after (i), the balance will be carried back to the second YA immediately preceding YA 2021 (i.e. YA 2019); and

iii. Finally, where there are QD remaining after (ii) above, the balance will be carried back to the YA immediately preceding YA 2021 (i.e. YA 2020). 

The excess of QD that are not carried back can be carried forward for deduction against the body of persons’ future taxable income, subject to the meeting of conditions.

    For more details, please refer to e-Tax Guide Enhanced Carry-back Relief System (PDF, 413KB). 

    Claiming Carry-Back Relief

    To claim the carry-back relief, please submit the  Election Form  (PDF, 185KB) as mentioned in paragraph 9.9 of the Carry-back Relief System  (PDF, 695KB). Please note that the election is irrevocable. 

    Administrative Requirement for the Carry-Back Relief for YA 2021

    Bodies of persons electing for the carry-back based on the estimated amount of QD under the current carry-back relief system or the YA 2021  enhanced carry-back relief system need to take note of the following election timeframe and requirements:  

     When to make the election Anytime before the filing of the Body of Persons Income Tax Return for YA 2021.
     How to make the election

     Submit the following :

    1) Election Form (PDF,185KB) for Bodies of Persons for Carry-Back of Estimated Capital Allowances and Trade Losses; and

    2) Revised tax computations for all three YAs (where applicable) immediately preceding YA 2021 (if the election is for the enhanced carry-back relief) or for YA 2020 (if the election is for the current carry-back relief).

     

    Once submitted, IRAS will not accept any revision to the estimated QD until the actual filing of the Body of Persons Income Tax Return. Bodies of persons are not required to submit another carry-back relief election form when submitting the YA 2021 Body of Persons Income Tax Return (Form P1) and tax computation. 

    IRAS will review and process the refunds (if any) within 3 months from the date of submission of the election form and the revised tax computation(s).