On or about 5 Mar 2021, the Inland Revenue Authority of Singapore (IRAS) has published the seventh edition of the e-Tax Guide on Carry-back Relief System. It replaces the sixth edition published on 3 Dec 2020.
This e-Tax Guide provides details on the carry-back relief system and is relevant to those with unabsorbed capital allowances or unutilised tax loss from trade, business, profession or vocation for the current year.
The carry-back relief under sec 37E of the Income Tax Act is available to all persons carrying on a business, including sole-proprietorships and partnerships. The relief will be given only if a claim is made for it.
Under the system, a person may carry back its current year qualifying deductions (QD) and deduct them against its assessable income of the immediate preceding YA.
For YAs 2020 and 2021, a person may elect to carry back QD and deduct them against its assessable income for up to three YAs immediately preceding the relevant YA of loss (i.e. YA 2017, YA 2018 and YA 2019 where the YA of loss is YA 2020, and YA 2018, YA 2019 and YA 2020 where the YA of loss is YA 2021) (referred to as “enhanced carry-back relief” in this e-Tax Guide).
A person may also elect for carry-back relief or enhanced carry-back relief based on an estimate of the QD for YAs 2020 and 2021. The maximum amount of QD that can be carried back is capped at $100,000.
The QD will be deducted in the order: (i) current year’s unabsorbed CA, if any, (ii) current year’s trade losses, if any.
The carry-back of unabsorbed CA is subject to the “same business” test. A company will have to satisfy the shareholding test as well. A company can elect to carry back its QD after transferring its loss items under the group relief system, if applicable.
In this seventh edition, the following revisions were made:
(i) Updated paragraph 2.2 and footnote 2 in the guide to incorporate the extension of the enhanced carry-back relief system to the QD for YA 2021, as announced in the 2021 Budget Statement.
Source: IRAS, 8 Mar 2021