Treatment of Business Losses in Singapore

Every company aims to make as much profit as possible. However, uncertain market conditions, economic crises, and even rapidly evolving technology can adversely impact business operations and cause losses. Unexpected situations such as the COVID-19 pandemic can also dramatically affect a company’s finances, making it difficult for both small and large businesses to sustain a healthy flow of revenue.

Under such conditions, when the business is suffering from losses, companies need to take steps to optimize the cash flow and minimize future losses. These steps can be taken by management or by a hired accounting firm in Singapore who will be familiar with both suitable working procedures and Singapore’s tax incentives.

1. Loss Carry Back

The law in Singapore also provides various provisions and guidelines for the handling of business losses. It allows the concept of loss carry-back, which means companies can offset their present losses against taxes submitted in the preceding accounting year. In simple words, companies can claim back tax if they are suffering significant financial losses. This is highly beneficial for companies, especially startups and small businesses.


Companies that want to claim their losses must pass the shareholding test. It means that there should be no modification in the shareholders and the shareholdings at the essential dates. The relevant dates are the last day of the year when a company had to suffer losses and the first day of the tax year for which the losses have to be deducted.


Moreover, the shareholding tests consist of making comparisons between the shareholding of an organization and the total amount of shares held by the same shareholder. If there is no significant change in the shareholders and their shareholdings, the company will be eligible for this loss, carry back the Singapore tax incentive.

2. Group Relief

An organization can transfer its unused trading losses incurred to another organization within the same group in the current year. These transferred losses will be deducted against the assessable income of the company that is receiving the losses. The business that is transferring the losses has the choice of transferring 100% of the losses as long as the other company is capable of receiving it.

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A company can qualify for group relief if it fulfils the following requirements:

  • Both of the companies should operate in Singapore
  • Both of the organizations should belong to the same group
  • At least 75% of the shareholders must agree to use this Singapore tax incentive.
  • The accounting year of both companies should end at a similar date.

3. Startups

The Singapore law provides several tax incentives for startups and small companies to help them make their mark in the industry.


These incentives also include supporting the business if it incurs losses in the company’s first few years. For instance, a newly incorporated organization in Singapore can apply for full tax exemption during the first three years. These exceptions and incentives allow companies to build a foundation in the market and recover from the losses it is likely to suffer in the first few years.


Similarly, if a startup or a small company chooses to carry back its losses, the deductions will set off against its former accounting year. If the company does not have any chargeable income left after the deduction, it will not qualify for tax exemption.


On the other hand, the startup can also choose to carry forward their trade losses and apply for the tax exemption scheme at the same time to avoid taxation issues.

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In a Nutshell

There are a number of ways to deal with business losses in Singapore. However, carrying back and carrying forward losses is the most common approach used by most companies in Singapore.


Accounting firms in Singapore are familiar with Singapore tax incentives. Organizations can rely on these firms to get the best accounting, auditing, and payroll services.


Moreover, these firms help businesses manage losses and take advantage of any tax relief scheme that might be applicable and allow them to recover financial losses quickly and efficiently. For more information, feel free to get in touch with us.