Carry-forward of unutilised capital allowances-
If, in any year of assessment, there are unabsorbed capital allowances, the amount can be carried forward to the following year subject to the taxpayer carrying on the same trade, profession or business. Any brought forward capital allowances are set off before current capital allowances and the order of set-off is on the first-in-first-out basis.
Certain conditions for set-off of the capital allowances –
- Capital allowances are first set-off against the income from the carrying of a trade, business, profession or vocation and then against other income
- Comptroller must be satisfied that there is no substantial change in the shareholders of the company (or its ultimate holding company) on the relevant dates
Where the continuity requirement applies, the shareholders of the company must be substantially same:
- on the last day of the year in which the allowance arose; and
- on the first day of the year of assessment for which the allowance is available
The shareholders may be considered substantially the same only if, on both dates –
- at least 50% of the paid-up capital of the company is held by, or on behalf of, the same persons;
- not less than 50% of the nominal value of the allotted shares of the company is held by or on behalf of the same persons.
Carry forward of unutilised trade losses-
Trade losses can also be utilised against income from business or other sources. If unutilised, they can be carried forward for set-off against future income provided that there is no substantial change in the shareholders of the company.
Also, brought forward capital losses are set-off before current losses on a first-in-first out basis.
Carry-back of unutilised capital allowances and trade losses-
Current year unutilised capital allowances and trade losses can be carried back for set-off against the income of the year immediately proceeding the year of assessment. The amount of deductions that can be carried back is capped at $100,000.
Conditions of no change in substantial shareholding applies in these cases as well.
Adjustment of capital allowances, losses or donations between income subject to tax at different rates –
An adjustment factor will be applied whenever the unabsorbed losses or capital allowances of a company are taxed at one tax rate are to be deducted against income subject to tax at another rate.
Waiver of continuity of ownership requirement–
Where there is substantial change in shareholders but the taxpayer is able to satisfy the tax authorities that the substantial change in shareholding was not for the purpose of obtaining any tax benefit or obtaining any tax advantage, a waiver may be granted in respect of the continuity of the ownership requirement.