Treatment of unabsorbed donations attributable to exempt income
37M.—(1) If —
(a)
any donation allowable under this Act for the year of assessment 2012 or any preceding year of assessment (referred to in this section as the attributed donation) is to be deducted from any income of a company under a provision of this Act or the Economic Expansion Incentives (Relief from Income Tax) Act (Cap. 86) in determining the amount of its income that is exempt from tax under that provision for that or any subsequent year of assessment; and
(b)
part or all of the attributed donation (referred to in this section as the balance) has yet to be fully deducted in determining the amount of income that is exempt from tax for the year of assessment 2012,
[Act 19 of 2013 wef 28/11/2013]
then the following provisions shall apply to the balance:
(i)
subject to paragraphs (iii) to (vii) and subsection (2), the balance shall be deducted from the statutory income of the company for the year of assessment 2013;
(ii)
subject to paragraphs (iii) to (vii) and section 37B, where the deduction under paragraph (i) cannot be made or fully made, the balance shall be deducted from the statutory income of the company for the year of assessment 2014, and so on;
(iii)
any balance not deducted against the statutory income of the company for the fifth year of assessment after the year of assessment relating to the basis period in which the donation was made shall be disregarded;
(iv)
for the purposes of paragraphs (i) and (ii), any donation made on an earlier date shall be deemed to have been deducted first;
(v)
where the part of the balance that may be deducted under paragraph (i) against any type of income in accordance with subsection (2) has been so deducted and a sum remains of that part of the balance after such deduction, a deduction under paragraph (ii) of the sum that so remains, or any sum that remains after one or more applications of this paragraph, shall be made in the following manner:
(A)
the sum shall first be deducted against the same type of income;
(B)
any sum remaining after that deduction shall be deducted against any other type of income in accordance with section 37B;
(vi)
notwithstanding paragraphs (i) and (ii), the balance shall be disregarded if the Comptroller is not satisfied that the shareholders of the company on the last day of the year in which the donation was made, were substantially the same as the shareholders of the company on the first day of the year of assessment in which the balance would otherwise be deductible; and
(vii)
section 37(13) to (17) shall apply, with the necessary modifications, for the purposes of paragraph (vi).
(2) The deduction under subsection (1)(i) shall be made in accordance with the following provisions:
(a)
section 37B shall not apply to the deduction;
(b)
if the company only derives normal income for that year of assessment, the balance shall be deducted against the normal income for that year of assessment;
(c)
if the company only derives concessionary income for that year of assessment, the balance shall be deducted against the concessionary income for that year of assessment;
(d)
if the company derives both normal income and concessionary income, or concessionary income that is subject to tax at different concessionary rates of tax, for that year of assessment, the balance shall be deducted against each type of income in such proportion as appears reasonable to the Comptroller in the circumstances;
(e)
if the company only derives income that is exempt from tax for that year of assessment, then section 37B(3) shall, with the necessary modifications, apply for the purpose of making a deduction of the balance under subsection (1)(ii) as if the balance were unabsorbed donation in respect of income of a company subject to tax at the rate of tax specified in section 43(1)(a).
(3) In this section —
“concessionary income” means income that is subject to tax at a concessionary rate of tax;
“concessionary rate of tax” has the same meaning as in section 14C;
“normal income” means income that is subject to tax at the rate of tax specified in section 43(1)(a).