Business Losses & Capital Allowances
Business Losses and Unutilised Capital Allowances
The Inland Revenue Authority of Singapore (IRAS) allows businesses to deduct expenses incurred for business or trade purposes. This includes losses incurred from business operations and unutilized capital allowances.
Business Losses
When your business incurs losses after deducting allowable expenses from your gross profit, these losses can be used to offset other income sources in the same year. If the losses cannot be fully offset, the unutilized amount can be carried forward to future years to offset against income until the losses are fully utilized.
Unutilized Capital Allowances
Capital allowances are tax deductions for the wear and tear of assets used in your business. If you are unable to fully utilize the capital allowances in a particular year due to insufficient income or business losses, the unutilized amount can be carried forward to future years.
Conditions for Carrying Forward Unutilized Losses and Allowances
To carry forward unabsorbed capital allowances, you must satisfy the same business test. This test determines if you continue to carry on the same trade, business, or profession for which capital allowances were granted. The test is satisfied if the same trade, business, or profession is being continued at the point when the unabsorbed capital allowances are utilized.
Loss Carry-Back Relief
In addition to carrying forward losses and allowances, businesses can also carry back current year unutilized trade losses and capital allowances to offset income earned in the immediate preceding year of assessment. The maximum amount that can be carried back is capped at $100,000.
Additional Information
For more information on business losses and unutilized capital allowances, please refer to the IRAS website.
How Bestar can Help
Business Losses and Unutilised Capital Allowances
Bestar can provide valuable assistance to businesses in managing business losses and unutilized capital allowances. Here are some ways they can help:
Understanding the rules and regulations: Tax laws and regulations can be complex and subject to change. Bestar can help businesses understand the specific rules and regulations that apply to their situation, ensuring they comply with all requirements.
Identifying eligible losses and allowances: Bestar can help businesses identify all eligible losses and unutilized capital allowances, ensuring they maximize their deductions and minimize their tax liability.
Calculating and claiming deductions: Bestar can accurately calculate the amount of losses and allowances that can be deducted and ensure they are properly claimed on tax returns.
Carrying forward and carrying back losses and allowances: Bestar can advise businesses on the best strategies for carrying forward unutilized losses and allowances to future years or carrying them back to previous years, optimizing their tax position over time.
Navigating the "same business test": Bestar can help businesses understand and meet the requirements of the "same business test" to ensure they can carry forward unutilized capital allowances.
Loss carry-back relief: Bestar can advise businesses on the eligibility and process for utilizing loss carry-back relief to offset income from the previous year.
Staying up-to-date with tax law changes: Tax laws are subject to change. Bestar stays informed about the latest updates and can advise businesses on how these changes may affect their ability to utilize losses and allowances.
Representing businesses in case of audits: If a business is audited by the IRAS, Bestar can represent them and ensure they are treated fairly.
By engaging Bestar, businesses can benefit from our expertise and ensure they are taking full advantage of the available provisions for business losses and unutilized capital allowances. This can lead to significant tax savings and improved financial management.
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