Navigating Unutilized Tax Losses in Singapore, Malaysia and Brunei

Abstract

Many tax systems allow unutilized tax losses to be carried forward or back to a different tax basis period or transferred to a different entity in a group of companies (known as group relief). Despite sharing a common tax heritage, the tax systems of Singapore, Malaysia and Brunei now treat the shifting of unutilized tax losses quite differently. This article analyses in detail the differences in tax treatment across these jurisdictions, with a focus on how their loss-shifting mechanisms operate and the safeguards implemented to protect the tax base. For example, both Singapore and Malaysia have a “shareholding test”, while Malaysia places considerable restrictions on the claiming of group relief. Notably, Singapore permits the carrying back of losses, but with such restrictive conditions that there might be little practical impact. The article considers how jurisdictions can balance making the tax system attractive to businesses while safeguarding the tax base.