Unabsorbed Tax Items: Carry-Forward Tests and Shareholding Waivers

Key steps and distinctions

Capital allowances require both the same-business and shareholding tests for carry-forward. Trade losses and donations require the shareholding test, with donations restricted to a five-year carry-forward period; allowances and trade losses have no stated time limit when their conditions continue to be met. At least 50% of issued shares must remain held by the same persons at the relevant dates, which differ for allowances and for losses or donations. Current-year allowances and trade losses may be carried back within the separate S$100,000 system; donations cannot. The three-year enhanced carry-back mentioned in the guide is confined to YA 2020 and 2021. Where a substantial ownership change is not tax-motivated, a company can apply for a discretionary shareholding-test waiver, including before it is ready to use the balances. Provide the change date, commercial reasons, buyer’s advantages, net worth, price and valuation basis, future plans and transferred activities. A granted waiver restricts allowances and losses to profits of the same originating trade or business; donation relief still has its five-year limit. Maintain the original-year balance and ownership evidence rather than relying only on the latest shareholder register.