The carried forward of unabsorbed company losses would be extended for 10 instead of 7 consecutive years of assessment, as was indicated in the Budget 2022.
In light of this, section 44(5F) has been amended with retrospective effect from YA 2019.
PR No. 1/2022, entitled "Time Limit for Unabsorbed Adjusted Business Losses Carried Forward," was released by the Inland Revenue Board (IRB) and has a publication date of 30 June 2022.
The PR starts with an explanation of how a business's adjusted income or losses are determined, as well as the tax treatment of adjusted business losses (both in the year that the losses first arose themselves, as well as the unabsorbed business losses that are carried forward).
Effective year of assessment 2006, the Minister of Finance has stipulated that a company with a substantial change in shareholding is allowed to carry forward accumulated adjusted business losses to be absorbed in that year of assessment and subsequent years of assessment unless a substantial change in shareholding occurs in a dormant company.
The PR reiterates that the continuity of ownership test will still apply in the case of carrying forward unabsorbed losses for a dormant company.
The PR provides examples to demonstrate how the Unabsorbed Adjusted Business Losses for the Year of Assessment 2019 can be Carried Forward as follows:-
The PR also discusses the Time Limit restriction above and provides examples to demonstrate the special provision that applies to unabsorbed business losses up to the Year of Assessment 2018.
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