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Mock Examination : CAT Paper FTX

Foundations In Taxation

Session : June 2014

Set by : Ms Lee Yuet Lai

Your Contact Number : ______________________________________

I wish to have my script marked by the lecturer and

collect the marked script at the SAA-GE Reception Counter

email me the marked script to ____________________________

(Please submit your script latest by 9th May 2014 for marking)

SAA GLOBAL EDUCATION CENTRE PTE LTD

Company Registration No. 201001206N

111 Somerset Road, TripleOne Somerset #06-01/02

Singapore 238164

Tel: (65) 6733 5731 Fax: (65) 6733 5750

Website: www.saage.edu.sg Email: [email protected]


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All rights reserved. LYL/FTX 2014 Page 1

Foundations In Accountancy

Foundations In Taxation (FTX)

(Singapore)

SAA Global Education

Mock Examination – 2014

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.


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TAX RATES, RELIEFS AND REBATES

The following Tax Table is to be used in answering the questions

Selected reliefs/ rebates for year of assessment 2014

Earned Income ReliefNormal Handicapped

Below 55 years $1,000 $4,000

55 – 59 years old $6,000 $10,000

60 years and above $8,000 $12,000

Spouse relief$2,000

Handicapped Spouse relief$3,500

Parent reliefNormal 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 relief

The relief is two times the amount of foreign maid levy paid in 2013 up to a maximum of$6,360.

NSman relief Key command and

staff appointment

holder

Non-key command

and staff

appointment

holder

Active NSman $5,000 $3,000

Non-active NSman $3,500 $1,500

For wife/widow of operationally ready NSman $750 $750

For each parent of operationally ready NSman $750 $750

CPF cash top-up relief $7,000


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Voluntary CPF contributions made by self-employed persons

36% of s10(1)(a) assessable trade income capped at $30,600 or actual

contribution whichever is lower.

Provident Fund

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.

Course fees relief

Relief for course fees up to $5,500 for eligible fees incurred on courses,

seminars and conferences attended.

Life insurance premiums

Premiums paid on own life and wife’s life insurance policies

If own CPF contribution is less than $5,000, claim is the lower of:

(1) 7% of the capital sum or amount of insurance premium paid,

whichever is lower

(2) The difference between $5,000 and own CPF contribution

No claim if own CPF contributions 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)

1st child 15% of Mother’s Earned Income

2n child 20% of Mother’s Earned Income

3r child and subsequent child 25% of Mother’s Earned Income

Maximum child relief (QCR / HCR plus WMCR) $50,000 each child

Maximum total WMCR is capped at 100% of

mother’s earned income


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Parenthood Tax Rebate

1st child

2nd

child

$5,000

$10,000

3rd child and subsequent child $20,000 per child

The child must be Singapore citizen babies born or legally adopted on or after 1 January

2008.

Singapore income tax corporate tax rates

Year of Assessment 2014 Tax rate – 17%

Partial tax exemptionFirst $10,000 of chargeable income 75% exemption

Next $290,000 of chargeable income 50% exemption

Tax exemption for new start-up companies

First $100,000 of chargeable income 100% exemption

Next $200,000 of chargeable income 50% exemption

Tax rebate for companies for Years of Assessment 2013 to 2015

Companies will be granted a 30% Corporate Income Tax (CIT) rebate capped at $30,000 foreach YA

Productivity and Innovation Credit (PIC) – Year of Assessment 2013 to 2015

- Training (enhanced deduction)

- Prescribed automation equipment (enhanced capital allowance)

An enhanced deduction/allowance can be claimed at 300% on up to $400,000 of qualifying

expenditure, in addition to the usual deduction/allowance.

The annual expenditure cap of $400,000 can be pooled to give a combined cap $1,200,000

for the years of assessment 2013 to 2015

Goods and services tax

Standard rate 7%

Registration threshold $1 million


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TAX RATES

Personal income tax rates for resident individuals for the YA 2014

Chargeable

Income

Taxrate

Taxpayable

S$ % $

On the first 20,000 0 NilOn the next 10,000 2 200

On the first 30,000 200On the next 10,000 3.5 350

On the first 40,000 550On the next 40,000 7 2,800

On the first 80,000 3,350On the next 40,000 11.5 4,600

On the first 120,000 7,950On the next 40,000 15 6,000

On the first 160,000 13,950

On the next 40,000 17 6,800

On the first 200,000 20,750On the next 120,000 18 21,600

On the first 320,000 42,350

Above 320,000 20


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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) 2014 be submitted to

the Comptroller of Income Tax (CIT) if the taxpayer filed the Form B electronically?

A. 18 April 2014B. 15 April 2014 1 mark

2.

Peter Chin received the following bonus in the year 2014:

-

Non- contractual bonus declared by his employer on 1 January 2014 and paid to himon 15 February 2014 - $30,000

- Contractual bonus paid to him on 15 January 2014 in relation to his employmentservice rendered in the year 2013 - $10,000

What is the amount of bonus assessable to tax in YA 2014?

A. $0

B. $30,000

C. $10,000

D. $40,000 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 2013 is as follows:

Salary and bonus - $190,000Free lance consultancy fee - $100,000Rental income - $20,000

Compute the total child relief available to Amelia for the YA 2014.

A. $109,500

B.

$97,500

C. $108,500

D. $116,500 3 marks


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4. Sophia is the sole proprietor of a beauty salon. Her assessable income derived from

the sole proprietorship business during the year 2013 was $60,000. She made

voluntary CPF contribution of $26,000 and compulsory medisave contribution of

$4,000 during the year 2013.

What is the amount of CPF relief claimable by Sophia for YA 2014?

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 2014. He will be leaving Singapore on

15 January 2015 back to Australia. His annual employment income for the year 2014

will be $150,000. By which date must Cambell Pte Ltd notify the CIT of the

cessation of employment of Jonathan?

A.

15 December 2014

B.

31 January 2015

C.

30 November 2014

D.

15 January 2015 1 mark

6.

Marbella Pte Ltd incurred the following renovation cost in the financial year ended 31

December 2013. Compute the amount of tax deductible expenses, including any

special deduction, claimable in YA 2014.

- Replacement of doors and windows - $2,000-

Repair of air-conditioners - $1,000- Installation of new lighting - $3,000- Installation of new carpet - $6,000- Replacement of floor tiles (with improvement) - $9,000

-

Structural changes approved by Commissioner of Building Control - $18,000

A. $33,000

B. $15,000

C. $9,000

D. $7,000 3 marks


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7. Compact Pte Ltd has unabsorbed capital allowances brought forward from financial

year ended 31 March 2012 (YA 2013) to be utilised against its adjusted profit in YA

2014.

State the relevant comparison dates for purposes of applying the shareholder test indetermining whether the company could utilise the brought forward capitalallowances.

A. 31 March 2012 and 1 January 2013

B. 31 March 2012 and 1 January 2014

C. 31 December 2013 and 1 January 2014

D. 31 December 2012 and 1 January 2014 3 marks

8.

Pan Asia Pte Ltd is a GST registered company. For the GST quarter ended 31

December 2013, the company has a net output GST payable to the Comptroller of

GST. By which date should the net output GST be paid to the Comptroller of GST?

A.

31 January 2014

B.

15 January 2014 1 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 2014.

A. 30 June 2014

B. 30 June 2013 1 mark

10. State the time of supply for GST purpose in respect of the following transactions:

Customer placed order -30 June 2013Goods delivered to customer - 3 July 2013

Tax invoice issued to customer -10 July 2013Payment received from customer -28 July 2013

A.

30 June 2013

B.

3 July 2013

C.

10 July 2013

D.

28 July 2013 2 marks

(Total 20 marks)


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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 inSingapore on 1 May 2013 under a two year employment contract.

He arrived in Singapore with his wife, Janet, a home-maker and his two children age3 and 7 years old, who are attending school in Singapore. Janet did not derive anyincome in the year 2013.

Jeremy derived the following income/benefit in Singapore for the period from 1 May2013 to 31 December 2013:

$Salary and bonus 84,000

Entertainment allowance 8,000

Children school fee reimbursed by the employer 16,350

Reimbursement of car expenses by employer (70%of the expenses were incurred for business travelling) 5,000

Overseas pension fund contribution by employer 10,000

Airfare borne by employer to bring Jeremy andfamily into Singapore 20,000

Airfare borne by employer to return to USA with hisfamily for Christmas 25,000

Jeremy derived interest income of $100 from a fixed deposit placed with an approved bank in Singapore. He also derived one-tier dividend of $200 in 2013.

Jeremy made a cash donation of $200 to Red Cross Society which is an approvedinstitution of public character in the year 2013.

Required:

Compute the minimum tax liability for Jeremy for the Year of Assessment (YA)

2014. (15 Marks)


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2.

Toyago Pte Ltd, a manufacturer of plastic molds was incorporated in Singapore inDecember 2005. It makes up its accounts to 30 September annually. Results for thefinancial year ended 30 September 2013 are as follows :

Note S$Revenue 4,200,000Cost of goods sold (2,80,000)Gross profit 1,400,000Interest income (received on 30.7.13 on a 6month fixed deposit)

5,000

1,405,000Less :Administrative expenses 1 (300,000)Distribution expenses 2 (150,000)Other expenses 3 (70,000)

Profit before tax 885,000=========

Notes:1. Administrative expenses include:Depreciation $100,000Entrance fee to a golf club 20,000Realised exchange loss on loan 3,000Loan to ex-staff written off 14,000Interest expense on loan to fund workingcapital 8,000

2. Distribution expenses include:Upkeep of van and lorry 9,000Reimbursement of motor car expenses to stafffor business travelling

7,000

3. Other expenses include:Legal fee for renewal of tenancy agreement 3,000Cash donation to National Kidney Foundation(an approved institution of public character)

1,000

Training expenses 6,000Installation of blinds 9,000Installation of new floor tiles 12,000

Required:

Compute the chargeable income and minimum tax liability of Toyago Pte Ltd for

the Year of Assessment 2014.

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 adjustment is necessary.

(15 marks)


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3. Childplay Pte Ltd is in the business of manufacturing of educational toys.

The company incurred the following capital expenditure in the financial year ended 31March 2013:

Motor vehicle $SDF 2022G 130,000Van 120,000

Furniture and EquipmentCarpet 12,000Office furniture :-less than $5,000 each 2,000-more than $5,000 each 24,000Fixed partition 10,000

During the year, the company disposed of some old equipment purchasedin the financial year 2011, details of which are as follows:CostWritten down value brought forward at 1 April 2012

$9,000$3,000

Sale proceed $1,000

The written down values of the company’s assets as at 31 March 2012 (excluding the assets disposed of) as agreed with the Comptroller ofIncome Tax were as follow. Capital allowance under S.19A has beenclaimed previously.

Remaining years TWDV2 years $8,0001 year $3,000

Required:

Calculate the maximum capital allowances for Year of Assessment 2014 and indicate

the items of expenditure which do not qualify for capital allowance. (10 marks)


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4 (a) Tanny Pte Ltd is a goods and services tax (GST) registered trader. The followinginformation relates to the company’s transactions for the quarter ended 31 December2013. The amounts are exclusive of GST:

Sales to local customers $300,000

Sales to overseas customers 100,000Purchase of stocks* 200,000Purchase of office equipment* 9,000Purchase of office supplies(purchased from non-GST registered suppliers) 1,000Motor car expenses for sales manager* 500

*Purchased from GST registered suppliers.

Required:

Calculate the net amount of GST payable or receivable by the company for the

quarter ended 31 December 2013. (3 marks)

4(b) The following is an extract of the GST return (F5) for Tanny Pte Ltd for the quarterended 31 December 2013.

Name Tanny Pte Ltd

Tax Reference No. 2008 07777A

GST Registration No. 2008 07777A

Due Date 31/1/2014

Period covered by this return i

S$Supplies

Total value of standard-rated supplies iiTotal value of zero-rated supplies iiiTotal value of exempt supplies

Total value of supplies

Purchases

Total value of taxable purchases iv

Taxes

Output tax due vLess: Input tax and refunds claimed viEquals:

Net GST to be paid to IRAS vii

Revenue

Revenue for the accounting period viii

Required: In your answer booklet, state the entries that should be entered in

boxes (i) to (viii). (4 marks)

4(c) State the conditions to be satisfied for input GST claim. (3 marks) (10marks)


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5 April Pte Ltd incurred the following in the Year of Assessment (YA) 2014:- Trade loss - $300,000- Capital allowance - $10,000- Approved donation (cash amount) - $2,000

It derived the following assessable income in the YA 2012 and 2013:

Assessable income for YA 2012 - $70,000Assessable income for YA 2013 - $150,000

The company would like to elect for carry back relief to carry back the qualifyingdeduction incurred in YA 2014. Assume that the conditions for carry back relief aresatisfied.

Required:

Compute the company’s assessable income in all the relevant year of assessmentindicating 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 followingexpenditure for the financial year ended 30 June 2013.

Automated equipment $1,300,000Fee for external trainer 10,000Rental of external training premises 3,000Refreshment for training 1,000Training material 500Transport for staff to attend training 300

Required:

Compute the total capital allowance and tax deduction, including amount of

enhance allowance and enhanced deduction claimable by the company under the

Productivity and Innovation Credit (PIC) scheme for the Year of Assessment

2014. (6 marks)

7 Mr Chan received a Notice of Assessment for Year of Assessment 2013 from the

Comptroller of Income Tax (CIT). The notice was issued on 15 January 2014

indicating tax payable of $5,000. He is not agreeable to the assessment.

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)


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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 subsidiaryd) Keyman insurance premiume)

Professional fee paid to tax consultant for tax appealf) Income tax of employee borne by the employer

Note: You are not required to give a reason for your decision.

(6 marks)

9 State whether the following statements are true or false:

a) Any receipt received by an employee which is not taxable will not be tax

deductible in the hands of the employer.

b) A GST-registered trader will not need to file any GST return if the trader’s annualturnover of taxable supply is below the $1millon threshold in a particular GSTquarter.

c) Foreign sourced income derived by individuals (except through a partnership inSingapore) in the YA 2014 will be tax exempt only if the individuals are taxresident of Singapore in the year 2013.

d)

A taxpayer can appeal to the Comptroller of Income (CIT) to amend hisassessment if he made a mistake/error in his tax returns. The application to theCIT must be made within 4 years after the end of the year of assessment (YA) inwhich the assessment was made in respect of assessment made from YA 2008onwards.

e) Industrial building allowance (IBA) has been phased out with effect from 22February 2010. Hence a taxpayer which acquired an industrial building on or

before 22 February 2010 will no longer be entitled to claim IBA on the qualifyingcost incurred of such industrial building in YA 2014 notwithstanding the buildingis still being used for qualifying activities in the financial year ended 31 December

2013.

f) Janet is a Singaporean. She was seconded to work for her employer’s subsidiarycompany in Shanghai from January to August 2013. Janet is considered to be anon-resident in the YA 2014 since she was away from Singapore for more than183 days in the year 2013.

Note: You are not required to give a reason for your decision.

(6 marks)

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