Please tell me more about tax laws on mergers.

A company has to satisfy the shareholders' continuity test, and the company must continue to carry on the same trade or business from which the capital allowances arose, before unabsorbed capital allowances and losses can be deducted. This is provided for in Sect. 23 and Sect. 37(2)(a) of the Income Tax Act. This tax treatment applies to all companies whether it is a large corporation or an SME.

In the shareholders' continuity test, companies must satisfy the Comptroller of Income Tax that there is no substantial change in the company''s shareholders and their shareholdings before the unabsorbed forward losses can be utilised. The relief will only be given if at least 50% of the total shares are beneficially owned by the same persons.

Hence, only when there is a change in beneficial ownership of more than 50% would the unabsorbed capital allowances and losses be disregarded.
The Comptroller normally requires the company to furnish a certificate from its external auditors to confirm that there has been no substantial change in its ultimate shareholders. Instead of furnishing an external auditors'' certificate, a company (large corporation or SME), which has no difficulties in identifying its ultimate shareholders, may furnish a listing of its shareholders and their respective shareholdings to prove that its shareholders have remained substantially the same.

The continuity test ensures that the benefits of deduction of business losses are not transferred to shareholders who did not have an interest in the company at the time the relevant losses were made. The Comptroller has, however, the discretion to waive the continuity of ownership requirement in certain circumstances.
The company with unabsorbed capital allowances and/or losses can apply to the Comptroller for a waiver of the continuity of ownership requirement (See Sect. 23(2A) and Sect. 37(8) of the Income Tax Act).

You can access the Income Tax Act from the Singapore Statutes Online.