Guide to Qualification for Group Relief under Singapore Tax Law
Group Relief enables companies to deduct unutilised capital allowances/ trade losses/ donations of one company from the assessable income of another company in the same group. In order to qualify for group relief, the transferor and claimant must be incorporated in Singapore, belong to the same group and have the same financial year end.
1. Incorporated in Singapore
The transferor and claimant must be Singapore incorporated companies. In determining ownership under GR, any holdings by or through non-Singapore incorporated companies will be disregarded.
In other words, where there is a foreign-incorporated company in the ownership chain, shareholdings by the foreign-incorporated company will not be considered for the purpose of determining direct or indirect shareholdings.
Similarly, any direct or indirect shareholdings by an entity which is not a Singapore-incorporated company (e.g. a trade association, an individual, etc.) will be disregarded.
2. Same Group of Companies
(1) Same Group of Companies with 75% Shareholding
Two Singapore-incorporated companies are members of the same group when:
(a) at least 75% of the ordinary share capital in one company is beneficially held, directly or indirectly, by the other; or
Example:
A Singapore-incorporated company (parent company) holds 90% of the ordinary share capital of its Singapore-incorporated subsidiary (Subsidiary A). Subsidiary A holds 90% of the ordinary share capital of its Singapore-incorporated subsidiary (Subsidiary B).
|
Company |
Percentage of ordinary shareholding |
75% met and therefore regarded as members of same group |
|
Parent and Subsidiary A |
Parent holds 90% (direct shareholding) of Subsidiary A |
Yes |
|
Parent and Subsidiary B |
Parent holds 81% (indirect shareholding) of Subsidiary B |
Yes |
|
Subsidiary A and Subsidiary B |
Subsidiary A holds 90% (direct shareholding) of Subsidiary B |
Yes |
(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.
Example:
A Singapore-incorporated company (parent company) holds 75% of the ordinary share capital of each of its Singapore-incorporated subsidiaries (Subsidiary A and Subsidiary B).
Subsidiary A and Subsidiary B are members of the same group as at least 75% of the ordinary share capital in each of the subsidiary is held directly by a third Singapore-incorporated company (parent company). Parent, Subsidiary A and Subsidiary B are therefore all members of the same group.
(2) Tests of Ordinary Shareholding
The ordinary shareholding must be maintained at or above 75% during the continuous period that ends on the last day of the basis period. (The basis period for any YA is the period for which the profits of the company are taxed). There are two tests to apply in determining ordinary shareholding.
(a) First-Level Test: Ordinary shareholding requirement
To pass this test, there has to be ownership of at least 75% of the ordinary share capital in the company. Ordinary shares are all shares issued by a company that carry a right to variable profit participation and exclude shares that carry only a right to fixed dividends.
(b) Second-Level Test: Profits and assets available for distribution
Holders of ordinary shares must demonstrate that they are beneficially entitled, directly or indirectly, to at least 75% of:
(i) any residual profits of the company available for distribution to the company's equity holders; and
(ii) any residual assets of the company available for distribution to the company's equity holders upon winding-up of the company.
3. Same Financial Year End
Members of the same group must have the same financial year end to qualify for GR. This requirement is only applicable between a transferor company and claimant company. Other companies in the same group may have different financial year end as long as they are not the transferor or claimant.
Example:
Company A is a transferor and company B is a claimant. Both companies are also related indirectly through company C within the same group. C need not have the same financial year end if it is neither transferring its loss items to B nor claiming loss items from A.
Source: IRAS Official Website
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