Companies may carry back unutilised capital allowances and trade losses arising in a Year of Assessment (YA) to reduce the amount of taxes payable in the immediate preceding YA.
On this page:
What is Loss Carry-Back Relief
The Loss Carry-Back Relief allows a 1-year carry-back of current year unutilised capital allowances and trade losses, and complements the existing policy of companies being able to carry forward their unutilised capital allowances and trade losses to set-off future income (i.e. Loss Carry-Forward Relief) or transfer unutilised capital allowances and trade losses to related companies (i.e. Group Relief).
To help businesses with their cash flow, it was announced in Budget 2020 and 2021 that the Loss Carry-Back Relief would be enhanced for YAs 2020 and 2021 as follows:
| YA 2020 | YA 2021 |
|---|---|
|
|
Main Features & Conditions
- Current year unutilised capital allowances and trade losses (collectively referred to as 'Qualifying Deductions' or 'QD') can be carried back for 1 YA immediately preceding that YA in which the capital allowances are granted or the trade losses incurred.
- The maximum amount of QD that can be carried back is $100,000.
- The QD is to be deducted from your company’s assessable income of the immediate preceding YA in the following order:
- Current year's unutilised capital allowances, if any
- Current year's trade losses, if any
- Your company has to meet the substantial shareholding test and same business test in order to qualify for the relief. This is similar to the requirements for the carry-forward of unutilised capital allowances and trade losses.
- The Carry-Back Relief is given only if the company makes a claim.
- Your company can elect to carry back its QD after transferring its loss items under the Group Relief system, if applicable.
- The excess of QD that are not carried back can be carried forward for deduction against your company’s future taxable income, subject to the meeting of conditions (i.e. shareholding test and/or same business test).
Main Features and Conditions of the Enhanced Carry-Back Relief for YAs 2020 and 2021
- QD from YAs 2020 and 2021 can be carried back for up to 3 YAs immediately preceding that YA in which the capital allowances are granted or the trade losses incurred.
- For the purpose of carrying back the QD under the enhanced Carry-Back Relief, the carry-back shall be made in the following order:
| YA 2020 | YA 2021 |
|---|---|
|
|
- All other features and conditions remain the same as the 1-year Carry-Back Relief.
Learn more about the enhanced Carry-Back Relief system (PDF, 413KB) for YAs 2020 and 2021.
New Start-Up Companies Claiming Loss Carry-Back Relief
If your company qualifies for the Tax Exemption Scheme for New Start-Up Companies, you should note that the qualifying deductions (i.e. current year unutilised capital allowances and/or unutilised trade losses) will be first used to set-off against its assessable income for the YA (or the third YA under the enhanced Carry-Back Relief system) immediately preceding the YA of loss. This means that, when the chargeable income is nil after deducting the Loss Carry-Back Relief, your company will not be able to enjoy the benefit given under the Tax Exemption Scheme for New Start-Up Companies for that particular YA.
When there is chargeable income after deducting the Loss Carry-Back Relief, your company can then claim exemption under the Tax Exemption Scheme for New Start-Up Companies.
Do ensure that the Loss Carry-Back Relief is beneficial to your company before making a claim. Elections made are irrevocable.
Example
Company A is incorporated in year 2020 and its first YA upon incorporation is YA 2021. It qualifies for the Tax Exemption Scheme for New Start-Up Companies for YAs 2021 to 2023 and has current year unutilised trade losses of $100,000 in YA 2023.
Company A's tax computation for YA 2022 is as follows:
| YA 2022 | $ |
|---|---|
| Assessable Income | 120,000 |
| Less: Tax Exemption for New Start-Up Companies | |
| First $100,000 @ 75% | (75,000) |
| Next $20,000 @ 50% | (10,000) |
| Chargeable Income After Exempt Amount | 35,000 |
| Net Tax Payable at 17% | 5,950.00 |
Scenario 1: Company A does not elect to carry back its YA 2023 losses to YA 2022
Company A's current year unutilised trade losses of $100,000 in YA 2023 may be carried forward for set-off against its assessable income of future YAs, provided the substantial shareholding test has been met.
Come YA 2024, Company A has an adjusted trade profit of $200,000. Assuming that the substantial shareholding test has been met, Company A's tax computations for YAs 2023 and 2024 are as follows:
| YA 2023 | $ |
|---|---|
| Adjusted Trade Losses | 100,000 |
| Unutilised Losses Carried Forward | 100,000 |
| Net Tax Payable at 17% | NIL |
| YA 2024 | $ |
|---|---|
| Adjusted Trade Profit | 200,000 |
| Less: Unutilised Losses Brought Forward | (100,000) |
| Chargeable Income Before Exempt Amount | 100,000 |
| Less: Exempt Amount under Partial Tax Exemption | |
| First $10,000 @ 75% | (7,500) |
| Next $90,000 @ 50% | (45,000) |
| Chargeable Income After Exempt Amount | 47,500 |
| Net Tax Payable at 17% | 8,075.00 |
| Summary | $ |
|---|---|
| YA 2022 Net Tax Payable | 5,950.00 |
| YA 2023 Net Tax Payable | NIL |
| YA 2024 Net Tax Payable | 8,075.00 |
| Total Tax Payable | 14,025.00 |
Scenario 2: Company A elects to carry back its YA 2023 losses to YA 2022
Company A’s current year unutilised trade losses of $100,000 in YA 2023 are carried back to YA 2022 for set-off against assessable income arising from YA 2022.
Company A's tax computations for YAs 2022 and 2023 are as follows:
| YA 2022 | $ |
|---|---|
| Assessable Income | 120,000 |
| Less: Losses Carried Back from YA 2023 | (100,000) |
| 20,000 | |
| Less: Tax Exemption for New Start-Up Companies | |
| First $20,000 @ 75% | (15,000) |
| Chargeable Income After Exempt Amount | 5,000 |
| Net Tax Payable at 17% | 850.00 |
| YA 2023 | $ |
|---|---|
| Adjusted Trade Losses | 100,000 |
| Less: Losses Carried Back to YA 2022 | (100,000) |
| Unutilised Losses carried forward | NIL |
| Net Tax Payable at 17% | NIL |
Come YA 2024, Company A has an adjusted trade profit of $200,000. Company A's tax computation for YA 2024 is as follows:
| YA 2024 | $ |
|---|---|
| Adjusted Trade Profit | 200,000 |
| Less: Unutilised Losses Brought Forward | NIL |
| Chargeable Income Before Exempt Amount | 200,000 |
| Less: Exempt Amount under Partial Tax Exemption | |
| First $10,000 @ 75% | (7,500) |
| Next $190,000 @ 50% | (95,000) |
| Chargeable Income After Exempt Amount | 97,500 |
| Net Tax Payable at 17% | 16,575.00 |
| Summary | $ |
|---|---|
| YA 2022 Net Tax Payable | 850.00 |
| YA 2023 Net Tax Payable | NIL |
| YA 2024 Net Tax Payable | 16,575.00 |
| Total Tax Payable | 17,425.00 |
Specific Exclusions
- Section 10D companies are not allowed to carry back their qualifying deductions (QD). This is consistent with the treatment under the Loss Carry-Forward and Group Relief systems, where Section 10D companies are also excluded.
- Companies that carry on a trade where the income is wholly exempt from tax (e.g. pioneer trade) are not allowed to carry back the QD relating to that trade for deduction against other exempt or non-exempt income.
- Companies that carry on specific types of activity or trade where there are rules restricting the deduction of QD only against such trade and activity or restricting the carry-forward of the QD (e.g. finance leasing income taxable under Section 10C of the Income Tax Act 1947 or income from hiring out motor cars taxable under Section 10F) are not allowed to carry back the QD.
Learn more about the specific exclusions from Carry-Back Relief (PDF, 845KB).
How to Claim Loss Carry-Back Relief
To claim Loss Carry-Back Relief based on the actual qualifying deductions (QD), your company must indicate the election in its Corporate Income Tax Return (Form C) and tax computation for the relevant YA. Companies that wish to make the claim cannot use Form C-S or Form C-S (Lite).
The revised tax computation(s) for the relevant preceding YA(s) should also be submitted separately through the Submit Document digital service found on the 'Submit Document' page. You will be directed to this page after filing your company’s Form C. The document type 'Revised TC and supporting schedules for Loss Carry-Back Relief and Income not previously reported' should be selected for this purpose.
Do note that the election is irrevocable.
Administrative Procedures Specifically for the Carry-Back Relief for YA 2021
If your company is electing for the carry-back based on the estimated amount of QD under the current Carry-Back Relief system or the enhanced Carry-Back Relief system, you should take note of the following election time frame and requirements:
| When to make the election | How to make the election |
|---|---|
| Anytime before the filing of the Corporate Income Tax Return (Form C) for YA 2021 | Submit the following via the Submit Document digital service* at mytax.iras.gov.sg:
|
* Your company is required to combine the election form and the revised tax computations into 1 PDF document and upload it under the document type ‘Revised TC and supporting schedules for Loss Carry-Back Relief and Income not previously reported’ for YA 2021.
Once submitted, IRAS will not accept any revision to the estimated QD until the actual filing of the YA 2021 Form C. Your company is not required to submit another Carry-Back Relief election form but must indicate the actual QD in the YA 2021 Form C and tax computation.
Where the actual QD at the time of filing the YA 2021 Form C is different from the estimated QD that was submitted earlier, your company is required to resubmit the revised tax computations via the Submit Document digital service at mytax.iras.gov.sg.
IRAS reviews and processes the refunds (if any) within 3 months from the date of submission of the election form and the revised tax computation(s).