The Income Tax (Amalgamation of Companies) (Amendment) Regulations 2025, gazetted 27 November 2025, introduce a critical modification to the Enterprise Innovation Scheme (EIS) capping rules for corporate amalgamations.
Key Change:
For the Year of Assessment (YA) in which an amalgamation occurs, the amalgamated company’s EIS claim cap is no longer a fresh $400,000 (or $50,000 for innovation projects) per qualifying activity. Instead, its maximum allowable qualifying expenditure for each activity is the difference between the standard cap and the total expenditure on which EIS benefits were already claimed or allowed to the amalgamating companies for that same YA and activity.
Practical Impacts & Issues for Accountants:
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Due Diligence Imperative: Pre-amalgamation due diligence must now rigorously quantify EIS expenditures already claimed or in the pipeline by each amalgamating entity for the relevant basis period. This is essential for accurate post-amalgamation tax forecasting.
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Pro-Ration Complexity: The amendment formalizes a proration mechanism for the amalgamation year. This prevents double-claiming but adds complexity to tax computations for the transitional YA. Clear allocation and tracking of pre- and post-amalgamation qualifying expenditures are required.
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Cash Flow Planning: For companies relying on EIS-enhanced deductions or cash payouts, the reduced cap in the amalgamation year may impact expected tax savings or cash inflows. Financial projections should be adjusted accordingly.
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Compliance Documentation: Robust documentation must be maintained to substantiate the EIS claims of both amalgamating and the amalgamated company, ensuring a clear audit trail for the IRAS.
Action:
Companies contemplating or undergoing amalgamation for YA 2025 onwards must integrate this revised capping calculation into their tax modelling and compliance procedures immediately.
Source: Government Gazette, 28 November 2025