Foundations In Taxation

Transcription

1 Mock Examination : CAT Paper FTX Foundations In Taxation Session : June 2012 Set by : Ms Lee Yuet Lai Your Lecturer Ms Lee Yuet Lai Ms Lisa Foo Your Mailing Address : Your Contact Number : I wish to have my script marked by my lecturer and collect the marked script at the SAA-GE Reception Counter have the marked script returned to me by mail (Please submit your script latest by 16 th May 2012 for marking) SAA GLOBAL EDUCATION CENTRE PTE LTD Company Registration No N 20 Aljunied Road, #01-04, CPA House, Singapore Tel: (65) Fax: (65) Website: acca@saage.edu.sg

2 Foundation In Accountancy Foundation In Taxation (FTX) (Singapore) SAA Global Education Mock Examination May 2012 Time allowed Writing 2 hours This paper comprises TWO Sections. Section A (Total 20 marks) 10 Multiple choice questions (MCQ) ALL questions are COMPULSORY. Section B (Total 80 marks) ALL Nine questions are COMPULSORY and MUST be answered Tax rates and allowances are attached. Should any part of this paper be reproduced, the writer should be informed in writing, as a matter of courtesy. Neither the writer nor SAA GE accepts any responsibility for any loss to any person as a result of the material in this paper. SAA GE and the writer bear no responsibility for the contents of the paper, which is written for a particular course. All rights reserved. LYL/FTX May2012 Page 1

3 TAX RATES, RELIEFS AND REBATES The following Tax Table is to be used in answering the questions Selected reliefs/ rebates for year of assessment 2012 Earned Income Normal Handicapped Below 55 years $1,000 $2, years old $3,000 $5, years and above $4,000 $6,000 Spouse relief $2,000 Handicapped Spouse relief $3,500 Parent relief Normal Handicapped - Parents stay with taxpayer $7,000 $11,000 - Parents do not stay with taxpayer $4,500 $8,000 Grandparent Caregiver Relief (GCR) $3,000 Dependant handicapped sibling relief $3,500 Foreign maid levy The relief is two times the amount of foreign maid levy paid in 2011 up to a maximum of $6,360. Nsman relief Key command and staff appointment holder Performed National Service (Active) $5,000 $3,000 Completed full time National Service but did not perform any in-camp training (Non-active) $3,500 $1,500 Non-key command and staff appointment holder All rights reserved. LYL/FTX May2012 Page 2

4 For wife of operationally ready Nsman $750 $750 For each parent of operationally ready Nsman $750 $750 CPF Relief Compulsory contributions to CPF/approved pension or provident fund by Singaporeans and Singapore permanent resident employees, subject to not more than the statutory contributions under the CPF Act. CPF top-up scheme $7,000 Voluntary CPF contributions made by self-employed persons 36% of s10(1)(a) assessable trade income up to a maximum of $30,600 for contributions made in Life insurance Premiums paid on own life and wife s life insurance policies restricted to: (1) 7% of the capital sum insured (2) $5,000 if CPF contributions claimed is less than $5,000 (3) no claim if CPF contributions claimed exceeds $5,000 Child Relief Qualifying Child Relief (QCR) Per child $4,000 Relief given to all qualifying children Handicapped Child Relief (HCR) Per child $5,500 Working Mother Child Relief (WMCR) 1 st child 15% of Mother s Earned Income 2 nd child 20% of Mother s Earned Income 3 rd child and subsequent child 25% of Mother s Earned Income Maximum child relief (QCR / HCR plus WMCR) $50,000 each child All rights reserved. LYL/FTX May2012 Page 3

5 Cumulative WMCR% capped at 100% of mother s earned income Parenthood Tax Rebate 1 st child 2 nd child $5,000 $10,000 3 rd child and subsequent child $20,000 each The child must be Singapore citizen babies born or legally adopted on or after 1 January TAX RATES Personal income tax rates for resident individuals for the YA 2012 Chargeable Income Tax rate Tax payable S$ % $ On the first 20,000 0 Nil On the next 10, On the first 30, On the next 10, On the first 40, On the next 40, ,800 On the first 80,000 3,350 On the next 40, ,600 On the first 120,000 7,950 On the next 40, ,000 On the first 160,000 13,950 On the next 40, ,800 All rights reserved. LYL/FTX May2012 Page 4

6 On the first 200,000 20,750 On the next 120, ,600 On the first 320,000 42,350 Above 320, Singapore income tax corporate tax rates Year of Assessment Tax rate % Partial tax exemption Up to the 1 st $10,000 of chargeable income On the next $290,000 of chargeable income 75% exemption 50% exemption Full tax exemption Up to the 1 st $100,000 of chargeable income On the next $200,000 of chargeable income 100% exemption 50% exemption Goods and services tax Standard rate 7% Registration threshold $1 million All rights reserved. LYL/FTX May2012 Page 5

7 Section A (20 marks) All TEN questions are compulsory and MUST be attempted. 1. By which date should Form B for the Year of Assessment (YA) 2012 be submitted to the Comptroller of Income Tax (CIT) if the taxpayer filed the Form B electronically? A. 18 April 2012 B. 15 April mark 2. Peter Morie, an American worked in Singapore from March to December He was paid the following remuneration. Salary - $10,000 per month Bonus - $30,000 His company paid for his airfare of $2,700 for a returned trip to US for home leave. What is Peter s employment income assessable to tax in YA 2012? A. $130,000 B. $120,540 C. $130,540 D. $131,800 2 marks 3. Amelia is a widow and has two children (twin) both are 12 years old, schooling and Singapore citizen. Her income during the year 2011 is as follows: Salary and bonus - $190,000 Free lance consultancy fee - $100,000 Rental income - $20,000 Compute the total child relief available to her for the YA A. $109,500 B. $97,500 C. $108,500 D. $116,500 3 marks All rights reserved. LYL/FTX May2012 Page 6

8 4. Sophia is the sole proprietor of a beauty salon. Her assessable income derived from the sole proprietorship business during the year 2011 was $60,000. She made voluntary CPF contribution of $26,000 and compulsory medisave contribution of $4,000 during the year What is the amount of CPF relief claimable for YA 2012? A. $30,000 B. $21,600 C. $30,600 D. $4,000 3 marks 5. Jonathan is an Australian and will be terminating his employment with Cambell Pte Ltd, a Singapore company, on 31 December He will be leaving Singapore on 15 January 2013 back to Australia. His annual employment income for the year 2012 will be $150,000. By which date must Cambell Pte Ltd notify the CIT of the cessation of employment of Jonathan? A. 15 December 2012 B. 31 January 2013 C. 30 November 2012 D. 15 January mark 6. Marbella Pte Ltd incurred the following renovation cost in the financial year ended 31 December Compute the tax deduction, including any special deduction, claimable in YA Replacement of doors and windows - $2,000 - Repair of air-conditioners - $1,000 - Installation of new lighting - $3,000 - Installation of new carpet - $5,000 - Replacement of floor tiles (with improvement) - $9,000 A. $21,000 B. $13,000 C. $16,000 D. $7,000 3 marks All rights reserved. LYL/FTX May2012 Page 7

9 7. Compact Pte Ltd has unabsorbed trade loss brought forward from financial year ended 31 March 2010 (YA 2011) to be utilised against its adjusted profit in YA State the relevant comparison dates for purposes of applying the shareholder test in determining whether the company could utilise the brought forward trade loss. A. 31 March 2010 and 1 January 2011 B. 31 March 2010 and 1 January 2012 C. 31 December 2010 and 1 January 2011 D. 31 December 2010 and 1 January marks 8. Pan Asia Pte Ltd is a GST registered company. For the GST quarter ended 31 December 2011, by which date should the GST return F5 be submitted to the Comptroller of GST? A. 31 January 2012 B. 15 January mark 9. Island Pte Ltd s financial year end is 31 March. State the deadline for the submission of estimated chargeable income for the YA A. 30 June 2012 B. 30 June mark 10. State the time of supply for GST purpose in respect of the following transactions: Customer placed order -30 June 2011 Goods delivered to customer - 3 July 2011 Tax invoice issued to customer -10 July 2011 Payment received from customer -28 July 2011 A. 30 June 2011 B. 3 July 2011 C. 10 July 2011 D. 28 July marks (Total 20 marks) All rights reserved. LYL/FTX May2012 Page 8

10 Section B (80 Marks) All NINE questions are compulsory and must be attempted. 1. Jeremy Smith is a 33 years old American. He commenced his employment in Singapore on 1 May 2011 under a two year employment contract. He arrived in Singapore with his wife, Janet, a home-maker and his two children age 3 and 7 years old, who are attending school in Singapore. Janet did not derive any income in the year Jeremy derived the following income/benefit in Singapore for the period from 1 May 2011 to 31 December 2011: $ Salary and bonus 84,000 Entertainment allowance 4,000 Children school fee reimbursed by the employer 16,000 Reimbursement of car expenses by employer (70% of the expenses were incurred for business travelling) 5,000 House rental paid by employer for an unfurnished apartment 32,000 Overseas pension fund contribution by employer 8,000 Airfare borne by employer to bring Jeremy and family into Singapore 7,000 Jeremy made a cash donation of $200 to Red Cross Society which is an approved institution of public character in the year Required: Compute the minimum tax liability for Jeremy for the Year of Assessment (YA) (15marks) All rights reserved. LYL/FTX May2012 Page 9

11 2. Toyago Pte Ltd, a manufacturer of plastic molds was incorporated in Singapore in December It makes up its accounts to 30 September annually. Results for the financial year ended 30 September 2011 are as follows : Note S$ Revenue 4,200,000 Cost of goods sold (2,80,000) Gross profit 1,400,000 Interest income (received on on a 6 month fixed deposit) 5,000 1,405,000 Less : Administrative expenses 1 (200,000) Distribution expenses 2 (150,000) Other expenses 3 (70,000) Depreciation (100,000) Profit before tax 885,000 ========= Notes: 1. Administrative expenses include: Entrance fee to a golf club $20,000 Realised exchange loss on loan 3,000 Loan to ex-staff written off 10,000 Interest expense on loan to fund working capital 8, Distribution expenses include: Upkeep of van and lorry 9,000 Rental of car in Singapore 4,000 Reimbursement of motor car expenses to staff for 7,000 business travelling 3. Other expenses include: Legal fee for renewal of tenancy agreement 3,000 Cash donation to National Kidney Foundation (an 1,000 approved institution of public character) Repainting of office 6,000 Installation of blinds 9,000 Required: Compute the chargeable income and minimum tax liability of Toyago Pte Ltd for the Year of Assessment The company elect to claim maximum capital allowance. Note: You should start your computation with net profit before tax, and also list all the items referred to in Note 1 to 3, indicating with a 0 for those items which no All rights reserved. LYL/FTX May2012 Page 10

13 3. Fairplay Pte Ltd is in the business of manufacturing of educational toys. The company incurred the following capital expenditure in the financial year ended 31 March 2011: Motor vehicle $ SDF 2022G 130,000 Van 120,000 Furniture and Equipment Carpet 12,000 Office furniture : -less than $1,000 each 2,000 -more than $1,000 each 24,000 Fixed partition 10,000 During the year, the company disposed of some old equipment purchased in the financial year 2009, details of which are as follows: Cost $9,000 Written down value brought forward at 1 April 2010 $3,000 Sale proceed $1,000 The written down values of the company s assets as at 31 March 2010 (excluding the assets disposed of) as agreed with the Comptroller of Income Tax were as follow. Capital allowance under S.19A has been claimed previously. Remaining years TWDV 2 years $8,000 1 year $3,000 Required: Calculate the maximum capital allowances for Year of Assessment 2012 and indicate the items of expenditure which do not qualify for capital allowance. (10 marks) All rights reserved. LYL/FTX May2012 Page 12

14 4 (a) Tanny Pte Ltd is a goods and services tax (GST) registered trader. The following information relates to the company s transactions for the quarter ended 31 December The amounts are exclusive of GST: Sales to local customers $300,000 Sales to overseas customers 100,000 Purchase of stocks 200,000 Purchase of office equipment 9,000 Purchase of office supplies 1,000 Motor car expenses for sales manager 500 All of the above, except the purchase of office supplies, were purchased from GST registered suppliers. Required: Calculate the net amount of GST payable or receivable by the company for the quarter ended 31 December (3 marks) 4(b) The following is an extract of the GST return (F5) for Tanny Pte Ltd for the quarter ended 31 December Name Tanny Pte Ltd Tax Reference No A GST Registration No A Due Date (i) Period covered by this return 1/10/2011 to 31/12/2011 S$ Supplies Total value of standard-rated supplies ii Total value of zero-rated supplies iii Total value of exempt supplies Total value of supplies Purchases Total value of taxable purchases Taxes Output tax due Less: Input tax and refunds claimed Equals: Net GST to be paid to IRAS Revenue Revenue for the accounting period iv v vi vii viii Required: In your answer booklet, state the entries that would be entered in boxes (i) to (viii). (4 marks) All rights reserved. LYL/FTX May2012 Page 13

15 4(c) State the conditions to be satisfied for input GST claim. (3 marks) (10marks) 5 April Pte Ltd incurred the following in the Year of Assessment (YA) 2012: - Trade loss - $300,000 - Capital allowance - $10,000 - Approved donation (cash) - $2,000 It derived the following assessable income in the YA 2010 and 2011: Assessable income for YA $70,000 Assessable income for YA $150,000 The company would like to elect for carry back relief to carry back the qualifying deduction incurred in YA Required: Compute the company s assessable income in all the relevant year of assessment indicating any amount available for carry forward. State clearly the order of set-off. (6 marks) 6 Meiji Pte Ltd is a Singapore incorporated company. It incurred the following expenditure for the financial year ended 30 June Automated equipment $900,000 Fee for external trainer 10,000 Rental of external training premises 3,000 Refreshment for training 1,000 Training material 500 Transport for staff to attend training 300 Required: Compute the total allowance and deduction, including amount of enhance allowance and deduction claimable by the company under the Productivity and Innovation Credit (PIC) scheme for the Year of Assessment (6 marks) 7 Mr Chan received a Notice of Assessment for Year of Assessment 2011 from the Comptroller of Income Tax (CIT). The notice was issued on 30 April 2011 indicating tax payable of $5,000. He is not agreeable to the assessment. All rights reserved. LYL/FTX May2012 Page 14

16 Required: Advise Mr Chan on the course of action which he should take and the consequence if the appropriate action is not taken on a timely basis. (6 marks) 8 State whether or not the following business expenses are deductible for tax purposes: a) Interest expense to fund the purchase of a non-income producing investment b) Salary paid by a sole proprietor to himself c) Legal and professional fee incurred in the setting up of an overseas subsidiary d) Keyman insurance premium e) Professional fee paid to tax consultant for tax appeal f) Tax liability of the company (6 marks) 9 State whether the following statements are true or false: a) Unabsorbed capital allowance, trade loss and donation (collectively known as loss items ) brought forward from prior years will be forfeited if the ultimate shareholders of the company has changed substantially on the relevant dates. Similarly, these loss items will also be forfeited if the business of the company has changed. b) A GST-registered trader will not need to file any GST return if the trader s annual turnover of taxable supply is below the $1millon threshold. c) Interest income from approved banks derived by individual and company will be tax exempt. d) A taxpayer can appeal to the Comptroller of Income (CIT) to amend his assessment if he made a mistake/error in his tax returns. The application to the CIT must be made within 4 years after the end of the year of assessment (YA) in which the assessment was made in respect of assessment made from YA 2008 onwards. e) Industrial building allowance (IBA) has been phased out with effect from 22 February Hence a taxpayer which acquired an industrial building on or before 22 February 2010 will no longer be entitled to claim IBA on the qualifying cost incurred of such industrial building. f) A resident individual will not be entitled to claim life insurance premium relief so long as his CPF relief is $5,000 or more. All rights reserved. LYL/FTX May2012 Page 15