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Singapore Updates e-Tax Guide Utilizing Unabsorbed Capital Allowances, Trade Losses, and Donations — Orbitax Tax News & Alerts

The Inland Revenue Authority of Singapore has published an updated e-Tax Guide, Utilising Unabsorbed Capital Allowances, Trade Losses and Donations (Second Edition). The e-Tax guide sets out the administrative procedures with regard to the carry-forward and carry-back of unabsorbed capital allowances, trade losses, and donations. It is useful to any company that wishes to deduct its unabsorbed capital allowances, trade losses, and donations against its past year's or future years' assessable income.

In general, a company with unabsorbed capital allowances, trade losses, or donations can:

  • Transfer the current year unabsorbed capital allowances, trade losses, and donations to its related companies for deduction against their assessable income via group relief;
  • Keep them for deduction against its future assessable income; or
  • Carry back its current year unabsorbed capital allowances and trade losses for deduction against its assessable income of the immediately preceding year of assessment ("current carry-back relief") or three immediately preceding years of assessment ("enhanced carry-back relief").

If the company chooses the latter two, it must not have a substantial change in its shareholders. If there is a substantial change, the company may apply for a waiver of the requirement if the change is not for deriving any tax benefit or obtaining a tax advantage.

The main updates in the second edition of the e-Tax guide concern the "enhanced carry-back relief", which is applicable for the years of assessment 2020 and 2021. In this regard, reference is made to the e-Tax guide on the Enhanced Carry-back Relief System. Another update includes clarification on the tax treatment of unabsorbed donations after a waiver of the shareholding test has been granted. This includes that unabsorbed donations after the grant of a waiver can be allowed against statutory income subject to the five-year carry forward time limit.