When it comes to running a business, the main goal usually is to maximize profits. However, due to economic uncertainty as well as weak demand due to the current pandemic, many companies may find that they will incur losses. Here is the treatment of possible losses for Singapore companies.
Treatment of losses on a company level
Singapore allows companies to offset any trading losses against all income in the same accounting period. The income can come from the usual trading activity of the company, dividends, interest income and/ or rental income. Any untilised tax losses can be carried forward indefinitely and offset against future profits if the company passes the shareholding test. The shareholding test compares the percentage of the shareholdings of the company that is held by the same persons at relevant dates. If the percentage of shares held by common shareholders in the two relevant dates are 50% or more, the company would have passed the shareholding test.
Treatment of losses on a group level
A company may transfer the unutilised losses that it incurred in the current year to another company within the same group. A transferror company may transfer 100% of the losses so long as certain qualifying conditions are met and the claimant company can absorb the losses.
The qualifying conditions are:
- The transferror of the losses and the claimant must be companies incorporated in Singapore
- The transferror of the losses and the claimant must belong to the same group of companies
- The transferror of the losses and the claimant must satisfy the 75% shareholding threshold where
– at least 75% of the ordinary share capital in one company is beneficially held, directly or indirectly by the other, or;
– at least 75% of the ordinary share capital in both companies is beneficially held, directly or indirectly by a third Singapore company. - The transferror of the losses and the claimant both have the same accounting year
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
Yours Sincerely,
The editorial team at Singapore Secretary Services
For more useful articles and videos, visit the Singapore Secretary Services resource page.
Related articles:
What is an Exempt Supply and Out of Scope supply?
What is a Taxable Supply and Zero Rated Supply?
What is Estimated Chargeable Income (ECI)
Important compliance requirements for Singapore companies
All about the Singapore tax system and tax rates
Leave A Comment