12 September 2011

The IRAS has, on 6 September 2011, issued an e-Tax Guide on “Group Relief System”. The Guide outlines the details on the group relief system effective from the Year of Assessment (“YA”) 2003.

For tax purposes, companies within a group are treated as separate legal entities. Each company’s tax liabilities is determined independently from those of other companies within the same group. Under the group relief system introduced from YA 2003, group companies are recognised as one single company for the purpose of utilising each other’s unabsorbed capital allowances, trade losses and donations.

Therefore, a company with unabsorbed capital allowances, trade losses and donations for the current year can either:

•  keep them for deduction against its future assessable income; or
•  deduct them against another group company’s assessable income in the same year under the group relief system.

To enjoy the group relief, the company that transfers its unabsorbed capital allowances, trade losses and donations for the current year and the company that receives such items must:

•  be Singapore incorporated companies,
•  belong to the same group of companies and maintain ordinary shareholdings of 75%, and
•  have the same accounting year end.

The claim for group relief is subject to the rules governing the order of transfer of loss items, the quantum to be transferred and the administrative procedures as spelt out in the e-Tax Guide, “Group Relief System”.

This new e-Tax Guide replaces the previous e-Tax Guide “Loss transfer system of group relief” published by IRAS on 23 October 2002.

Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website. Visit http://www.iras.gov.sg/ for more information.