Public Ruling No 1 2022 issued

Public Ruling (PR) No. 1/2022 – Time Limit for Unabsorbed Adjusted Business Losses Carried Forward

The Inland Revenue Board (IRB) has recently issued PR No. 1/2022: Time Limit for Unabsorbed Adjusted Business Losses Carried Forward, dated 30 June 2022. The new 18-page PR comprises the following paragraphs and sets out five examples:

1.0          Objective

2.0          Relevant provisions of the law

3.0          Interpretation

4.0          Introduction

5.0          Ascertainment of adjusted income or loss of a business

6.0          Statutory income of a business

7.0          Aggregate income

8.0          Shareholding in a company

9.0          Ascertainment of chargeable income

10.0      Time limit for unabsorbed adjusted business losses carried forward

11.0      Special provision

12.0      Disclaimer

Broadly, the PR explains the tax treatment of adjusted business losses and the time period for which a person can carry forward its unutilised or unabsorbed business losses.

Some of the key points are outlined below.

• The PR explains how the adjusted income or losses of a business are ascertained, and the tax treatment of adjusted business losses (in the year the losses arose, as well as the unabsorbed business losses carried forward).
• The PR reiterates that unabsorbed business losses can only be carried forward if the shareholders of the company are substantially the same (the shareholding test). The PR explains the methodology of the shareholding test as well as the exemption provided by the MoF on the application of the shareholding test for non-dormant companies. 

Effective from the year of assessment (YA) 2019, the carry-forward period for unabsorbed business losses is restricted to 10 YAs. The PR explains and provides examples to demonstrate the above-mentioned restriction, as well as the special provision that applies to unabsorbed business losses for any YA prior to YA 2019.