Waiver of substantial shareholding test for a reorganisation involving a family trust

OSH recently received news of a successful application for waiver of substantial shareholding test under section 37(16) of the Income Tax Act on behalf of a family-owned company. The company underwent a series of reorganisation as part of the overall succession plan of the patriarch of the family. This involved, amongst others, the creation of a family trust which would hold an indirect interest in certain of the company’s shareholding for the benefit of the patriarch and his children.

On an advance ruling application made by the company, the Comptroller ruled that there was a substantial change of shareholding upon the creation of the family trust. OSH assisted in making submissions to the Comptroller that the requirements under section 37(16) of the Income Tax Act are duly met and thus, the company ought to qualify for a waiver of the substantial shareholding test.

The Comptroller agreed and the company was entitled to deduct its tax losses against its future profits.