Group Tax Relief
Early this week I was doing some tax planning with a business owner who owns more than 10 companies directly under his name. Some of these companies are doing well, some are not. When I asked if he would like to save some taxes via GR, he stared at me blankly…
When I did a quick calculation for him, he was slapping himself for having paid excessive taxes all these years…
Let me do some sharing here…
One of the key reason why companies decided to form a group company is the ability to enjoy Group Tax Relief, in short, we call Group Relief.
Group relief (GR) enables companies to deduct unutilised capital allowances/ trade losses/ donations of one company from the assessable income of another company in the same group.
That is,
- The group relief system basically recognises group companies as a single entity by allowing the current year unabsorbed capital allowances/trade losses/donations (collectively known as “loss items”) of one company to be offset against the assessable income of another company belonging to the same group. The transfer of loss items under the GR system is known as “group relief”.
GR is a system which treats companies in the same group as if they are one single company.
Under the GR system, the following items (referred to as “loss items”) of one company can be deducted from the assessable income of the other company of the same group:
- Current year unutilised capital allowances
- Current year unutilised trade losses
- Current year unutilised donations
Transfer of Loss items :
The company which transfers any of its loss items is called ‘transferor’.
The company which receives the loss items is called ‘claimant’.
A transferor may transfer its loss items to a claimant to be deducted from the assessable income of the claimant.
However, the transferor and claimant must be in the same group.
What is a group?
A group consists of a Singapore incorporated company and its Singapore incorporated group members.
Two Singapore incorporated companies are members of the same group if
(a) at least 75% of the ordinary share capital in one company is beneficially held, directly or indirectly, by the other; or
(b) at least 75% of the ordinary share capital in each of the two companies is beneficially held, directly or indirectly, by a third Singapore incorporated company.
Hope the above helps those business owners who are currently owning many companies.
If you need to form a Holding Company to hold the shares of your operating companies, please feel free to contact us at :
(O) +65 63851011
(M) +65 90880669
