If you operate a Singapore group with one profitable trading company and one loss-making subsidiary, you should not be paying corporate tax in one entity while the other entity is sitting on unused losses. Section 37B of the Income Tax Act allows current-year unabsorbed losses, capital allowances, and donations to be transferred between qualifying Singapore companies — within strict eligibility rules.
This 2026 guide explains how group relief actually works in Singapore: the 75% test, what can and cannot be transferred, the election procedure, and the most common reasons IRAS denies claims.
The Concept in One Paragraph
Group relief is a tax mechanism that treats a group of related Singapore companies as if they were a single entity for the purpose of using current-year losses. The transferor company gives up its loss to the claimant company in the same year of assessment. The claimant uses it to reduce its own assessable income. There is no actual cash transfer — and no group consolidated tax return — but the economic effect is the same as if the group had filed a single return.
Eligibility: The 75% Test
To qualify for group relief, both the transferor and the claimant must be:
- Singapore-incorporated companies;
- Members of the same group, meaning either one is a 75% subsidiary of the other, or both are 75% subsidiaries of a third Singapore-incorporated company;
- Have the same financial year end; and
- Have continued to be in the same group throughout the year of assessment.
What does “75% subsidiary” mean?
Company A is a 75% subsidiary of Company B if Company B (directly or through other Singapore-incorporated companies) beneficially holds at least 75% of:
- The ordinary share capital of Company A;
- The right to receive distributable profits of Company A; and
- The right to participate in distributable assets of Company A on a winding up.
All three thresholds must be met. The classic mistake is to test only the ordinary share capital and forget the distributable profits / winding-up tests. Preference shares with profit participation or liquidation preferences can break the 75% chain even when ordinary share ownership is intact.
What Can Be Transferred
Only three items qualify for transfer under Section 37B:
- Current-year unabsorbed trade losses (i.e. losses incurred in the year of assessment in question);
- Current-year unabsorbed capital allowances (typically Section 19/19A allowances that cannot be used by the transferor in that year); and
- Current-year unabsorbed donations made to approved Institutions of a Public Character.
Brought-forward (prior-year) losses, capital allowances, and donations cannot be transferred. They remain with the company that originally incurred them. This is one of the most important — and frequently misunderstood — features of the regime.
The Election Procedure
Group relief is not automatic. Both the transferor and the claimant must make an election in their respective corporate tax returns for the relevant year of assessment:
- The transferor elects to transfer specified amounts (which can be less than the total unabsorbed amount);
- The claimant elects to claim specified amounts; and
- The elections must match — same quantum, same items, same YA.
If the elections do not match, IRAS will reject the claim. In practice, the corporate secretary or tax agent prepares a group-relief worksheet showing the totals across all transferring and claiming companies in the group, and circulates it before filing season.
Filing deadline
The election must be made by the filing deadline of the relevant Form C/Form C-S — i.e. 30 November of the year of assessment. Late or amended elections are permitted only in limited circumstances and require IRAS approval.
Worked Example
Group structure:
- Holdco (Singapore Pte Ltd) — owns 100% of Trade Co and 100% of Service Co.
- Trade Co: YA 2026 chargeable income of S$500,000.
- Service Co: YA 2026 trade loss of S$200,000.
Service Co elects to transfer S$200,000 of current-year trade loss to Trade Co. Trade Co elects to claim it. After the transfer:
- Trade Co’s chargeable income: S$500,000 − S$200,000 = S$300,000.
- Service Co’s loss for YA 2026: nil (fully transferred).
Group tax payable at 17%: S$300,000 × 17% = S$51,000 (before partial exemption).
Without the transfer, Trade Co would have paid 17% × S$500,000 = S$85,000, while Service Co’s S$200,000 loss would have been carried forward — potentially never used if Service Co continues to lose money.
The “Continuity of Business” Trap
Under Section 37(13) of the Income Tax Act, the carry-forward of losses requires substantial continuity of shareholders. While Section 37B group relief deals with current-year losses (not carry-forward), the broader anti-avoidance principle in Section 37(13) still applies to losses that the transferor has carried forward from prior years.
The continuity test:
- Shareholders holding at least 50% of the company’s shares at the start of the year must be substantially the same as those holding 50%+ at the end of the year of assessment in which the loss is utilised.
If the group has been through M&A or a major share buy-back, run the continuity test before assuming group relief is available.
What Cannot Be Group-Relieved
- Brought-forward losses, capital allowances, and donations;
- Investment holding company losses (because they do not have a trade);
- Losses from non-trade income streams (e.g. passive rental income for non-property companies);
- Losses incurred when the transferor was not part of the same group;
- Losses where the transferor or claimant is a partnership, LLP, or non-Singapore-incorporated entity; and
- Foreign-source losses not chargeable to Singapore tax.
Group Relief and the Loss Carry-Back Scheme
Singapore also has a loss carry-back scheme allowing current-year unabsorbed losses and capital allowances to be carried back one year (capped at S$100,000). Group relief and loss carry-back are alternatives, not cumulative — a company that transfers a loss under Section 37B cannot also carry it back. The optimal choice depends on the marginal tax rate of the available claimant company or the carry-back year.
Common Mistakes
Mistake 1: Different financial year ends
If Trade Co’s FYE is 31 December and Service Co’s FYE is 30 June, group relief is not available for the difference in periods. The cure is to change one company’s FYE to match — but the change must be done with care, as FYE changes have their own tax and accounting implications.
Mistake 2: Foreign holding company
If the common holding company is foreign-incorporated, the 75% test fails — the third “parent” must be Singapore-incorporated. A foreign holdco can be addressed by inserting a Singapore intermediate holding company; the cost-benefit depends on group scale.
Mistake 3: Not making the election in time
If the corporate tax return is filed without the group relief election, the transfer is lost for that YA. There is no general amendment procedure to make a late election.
Interaction with the Partial Exemption
Singapore companies are entitled to a partial tax exemption on the first S$200,000 of chargeable income. Group relief reduces chargeable income before partial exemption is applied, so a high-volume relief claim can erode the exemption headroom of the claimant. The decision is rarely tax-detrimental but should be modelled.
Documentation IRAS Will Look For
- Group structure chart showing ownership percentages;
- Shareholders’ register confirming the 75% holdings;
- Audited financial statements of both transferor and claimant;
- Tax computations showing the loss/allowance/donation arising in the YA;
- The election forms in the respective Form C/C-S returns; and
- Board resolutions approving the election (good practice though not statutory).
Final Thoughts
Group relief is one of Singapore’s most generous corporate tax features for SME groups — and one of the most under-claimed. The 75% test is mechanical, the election is straightforward, and the cash benefit is real. The most common failure is not noticing that one group company has surplus capital allowances or losses that another could be using.
Before filing season, the group’s finance or tax function should run a group-relief stocktake: identify which entities have unabsorbed items, confirm the 75% chain holds, and prepare the matched election. Done correctly, the saving can fund a year of compliance fees.
— The Editorial Team, Raffles Corporate Services