Income Tax: Treatment of Certain Expenses incurred prior to the Commencement of a Business Activity
| Before the change | After the change | |
| Section 14A expenses incurred from 1 Jun 2014 to 24 Mar 2016 | Allowable in YA 2018 against income taxable at NTR, as any expenses incurred during this period are treated as incurred on 1 Jan 2017 and the Company’s GTP incentive commences on a later day, 1 Oct 2017. | Same tax treatment as before the Budget 2016 change. |
| Section 14A expenses incurred from 25 Mar 2016 to 31 Dec 2016 |
Allowable in YA 2018 against income taxable at NTR, as any expenses incurred during this period are treated as incurred on 1 Jan 2017 and the Company’s GTP incentive commences on a later day, 1 Oct 2017. (Note: this tax treatment is no longer applicable with the change announced in Budget 2016) |
Expenses that are directly attributable to the pre-GTP and GTP income would be offset against the respective income streams. The remaining section 14A expenses that cannot be directly identified to the respective income streams will be apportioned to the preGTP and GTP income based on income proportion, as follows: Pre-GTP income GTP income |
In this example, any section 14A expenses incurred during the period from 1 Jun 2014 to 24 Mar 2016 are allowable in YA 2018 against income at NTR while any section 14A expenses incurred during the period from 25 Mar 2016 to 31 Dec 2016 are allowable in YA 2018 against income taxable at NTR or concessionary tax rate (“CTR”) as stated in the table above. If there is insufficient chargeable income at NTR in that YA, the excess of such expenses over income may be offset against the company’s GTP income after the application of the section 37B adjustment factor.