Question 1

Victoria Tan (“Victoria”), aged 48, is a Singapore citizen and a widow. She is the Chief Financial Officer of Xpress Pte Ltd (“XPL”), a Singapore incorporated and tax resident company. XPL is a subsidiary of Xpress International Limited (“XIL”), a listed company on the Stock Exchange of Singapore.

Victoria has a daughter, Sally, aged 22 years old who is unmarried, mentally handicapped, and not working. Victoria has a son, Samson, aged 19 years old, who was enlisted for National Service (NS) on 13 February 2018. He receives an NSman allowance of $600 per month.

Victoria lives with her mother who is 76 years old, physically handicapped, and has no sources of income. She hires a domestic helper to look after her mother. In 2018, she paid a foreign maid levy of $720.

In 2018, Victoria derived the following employment and other income:

Her employer contributed to her CPF in accordance with the statutory requirement.

The use of a car:

The car was purchased by XPL on 1 January 2018 at a cost of $200,000 and has a residual value of $70,000.

The total mileage of the car for 2018 was 30,000 km, of which 15% was for Victoria’s private use. All petrol costs were borne by XPL.

Stock Option:

Victoria exercised the option to acquire 10,000 shares of XIL on 31 July 2018 at the exercise price of $2 per share, on meeting all the conditions of the option. The stock option had been awarded to her on 1 November 2016. The stock prices of XIL shares at the relevant dates were as follows:

1 November 2016  3$

31 July 2018             4$

(2) Other income

Victoria also received the following income in Singapore during the year 2018:

• $4,000 interest income from a loan she has extended to her brother, Thomas. He emigrated to Australia in 2015. Thomas has used 60% of the loan to fund the purchase of a property in Singapore and the remaining 40% of the loan to fund the purchase of a property in Australia.
• $1,500 dividend from a Cayman Islands company. There is no corporation tax or withholding tax in the Cayman Islands.
• Rental income from an office unit owned by Victoria is as follows:

Required:

• Compute the minimum tax payable by Victoria for the Year of Assessment 2019.
• Explain the tax treatment of a contractual bonus and a non-contractual bonus from the point of view of both the employee and the employer.

Question 2

Healthy Living Pte Ltd (“HLPL”) is a Singapore incorporated company with annual revenue of $860,000 for the financial year ended 31 December 2019. The company employs Singaporeans and foreign employees. The accountant of HLPL, Tracy, wishes to adopt Form C-S (simplified form for a small company) for tax filing and seeks your advice as a consultant on the requirements.

Required:

• State the conditions that HLPL must meet to qualify for the filing of Form C-S and the exact due dates for the filing of Form C-S.
• Advise Tracy on the relevant actions to be taken if HLPL raises an objection to the original assessment issued by IRAS.

Question 3

Peter, Steven, and Mark are partners in FAB Trading in Singapore since 1 June 2017. They have contributed the following capital to the partnership:

The interest of 6% per annum is payable on the capital contributed.

The partnership agreement also provides for the following:

The following information is relevant to the year ended 30 September 2018:

• FAB Trading had an adjusted trading profit of $500,000.
• Steven took some inventory items with a sales value of $5,000 (cost price of $2,000) from FAB Trading for his own personal use.
• The following assets were in use as at 30 September 2018:

* The machinery was disposed on 10 December 2017 for $5,000.

The partners would like to claim maximum capital allowances wherever possible. Assume that capital allowance was not claimed in the year of disposal.

Required:

• Calculate the maximum amount of total capital allowances, including the balancing adjustment on disposal of the machinery and renovation or refurbishment works deduction (S14Q) for the Year of Assessment 2019. Show all your workings clearly for each asset.
• Compute the adjusted profit/loss (after deduction of capital allowances/S14Q) of FAB Trading allocated to each of the three partners for the Year of Assessment 2019.

Question 4

Dynamic Industries Pte Ltd (“DIPL”) is a manufacturing company incorporated in Singapore. For the year ended 31 December 2018, DIPL made a net accounting profit of $330,000 before income tax. The following items were charged/(credited) to the Statement of Profit or Loss in arriving at the net accounting profit:

Other Income  $

(1) Net dividend received in Singapore after deducting 15% withholding tax in Country A. The headline tax rate of Country A is 20%. (10,000)
(2) Dividend income received from shares in Top Ltd in Country B, a tax haven. There was no corporate or withholding tax suffered on this
dividend income and the funds were used to repay a supplier in Hong
Kong in September 2018. (25,500)
(3) Interest received from OCBC Bank on the maturity of a fixed deposit. (3,500)

Expenses

(4) Staff salary, bonus, and statutory CPF contributions 450,000
(5) CPF contributions in excess of statutory limit contributions 20,500
(6) Directors’ fees 60,000
(7) Staff medical expenses 10,400
(8) Staff training expenses 12,400
(9) Exchange loss on overseas inventory purchases from Malaysia 35,000
(10) Exchange gain on settlement of US$ bank loan (4,400)
(11) Impairment loss of trade debts 15,800
(12) Increase in provision for warranty 25,600

(13) Hire purchase interest for purchase of a machinery 6,270
(14) Interest expense for a loan in Singapore to fund the share investment in 6,500

Top Ltd in Country B

(15) Legal fee for the recovery of a non-trade debt 2,000
(16) Legal fee for new factory tenancy agreement 2,800
(17) Legal fee for a lawsuit against a trade debtor 3,500
(18) Loss on sale of investment in shares 7,500
(19) The obsolete stock was written off 5,000
(20) Office rental & utilities 120,000
(21) Depreciation 570,000
(22) Penalty for late payment of CPF 3,300
(23) Reimbursement to staff for taxi and MRT fare 2,700
(24) Reimbursement of expenses for private registered vehicles 6,600
(25) Singapore withholding tax on royalties paid to a company in UK 4,000
(26) Donation of food and clothing to an orphanage in Myanmar 2,000
(27) Cash donation to National Kidney Foundation (an approved Institution of a Public Character) 5,000

DIPL acquired the following assets in the financial year ended 31 December 2018:

This building qualifies for the Land Intensification Allowance. Construction, which commenced in January 2018, was completed on 1 December 2018 and put into use in the same year. 15% of the total floor area of the building was for non-qualifying use at the end of the basis period.

Required:

• Explain the tax treatment of the monthly installments paid in respect of the machinery acquired on hire purchase and calculate the qualifying expenditure incurred for capital allowances claim for the Year of Assessment 2019. All dates and workings must be shown clearly.

• Calculate the maximum claims under the Land Intensification Allowance and other relevant capital allowance for the Year of Assessment 2019. (Note: Assume that none of the capital expenditure qualifies for S19A(2) capital allowance claim over 1-year.) All workings must be shown clearly.

• Compute the minimum tax liability of DIPL for the Year of Assessment 2019. All workings must be shown clearly.

Question 5

Delta Pte Ltd (“DPL”) is a Goods and Services Tax (“GST”) registered trader and engages in the import and export of seafood products. DPL’s transactions during the quarter from 1 October 2019 to 31 December 2019 are as follows:

Income $
(1) Sales to customers in Singapore 1,600,000
(2) Sales to customers in Malaysia and Thailand (These goods were purchased in Singapore and shipped directly to the customers.) 850,000
(3) Sales to customers in China (These goods were purchased from  suppliers in China and delivered directly to the customers.) 650,000
(4) Interest income from OCBC Bank of Singapore 3,000

Expenses

(5) Purchases of goods from GST-registered traders in Singapore 1,375,000
(6) Purchases of goods from China supplier for direct delivery to customers in China 520,500
(7) Local delivery costs in Singapore 80,000
(8) Warehouse rental in Singapore 25,000
(9) Purchases from non-GST registered traders 190,000
(10) Staff salaries, bonuses and CPF contributions 650,000
(11) Office utilities 24,000
(12) Trade association subscription fees 2,500
(13) Bank charges on Singapore bank account 800
(14) Petrol costs and maintenance of two delivery vehicles 4,500

Notes:

• All items are stated excluding GST, where applicable.
• Except for items (6) and (9), all the suppliers of DPL were Singapore GST-registered traders.

Required:

• Compute the net GST payable by or refundable to DPL for the quarter ended 31 December 2019. For each item, state clearly the type of supply and the amount of output/input GST, if any. For any item where no GST should be taken into account, state the reason(s).
• State the TWO conditions which must be met in order for DPL to satisfy the De Minimis rule and claim full common input tax.