ACCA模拟试题答案(1)_F6

F6 (SGP) TAXATION MOCK EXAM ANSWERS

(JUNE 2011 EXAM)Question 1

(a)

Rivon Pte Ltd

Tax Computation for Year of Assessment 2011

$ Net profit 700,000 Add/ Less

Gross Dividend income from Singapore subsidiary (100,000) Interest income from fixed deposit (7,500) Interest income from Australia (12,750) Interest on O/S trade debt not received in Singapore (N1) 0 Branch profits (27,000)

Depreciation 2,330,175

Exchange loss

- revenue 0

- capital 10,000

Insurance expenses

- SGB 9856 & SGB 90D 2,000 - Workmen's Compensation 0

- General business matters 0

Interest Expenses including hire purchase interest 0 Legal & consultancy fees 0 Loss on disposal of fixed asset 45,000 Medical expenses [59,600 - {1% x (3,458,500 - 5,148)} N2 25,066

Miscellaneous expenses

- Fines & Penalties 2,500 - Cash donations (5,000 + 8,000) 13,000

Motor vehicle expenses (SGB 9856 & SGB 90D) 59,502 Overseas business travelling expenses 0 Packing and freight charges 0 Rent 0 Repair & maintenance 0 Salary and CPF - excess CPF contributions (N2) 5,148 Staff welfare ( benefits in kind ) 0Payment to Golf Club (note 10 )

- entrance fees 107,000 - subscription fees 0

Subvention payment paid to Grace Pte Ltd 70,000

Adjusted trade profit 3,222,141 Less Capital allowance

For existing assets

- Computer equipment (YA 2009) Claimed S19A (1 year) Fully claimed

- Furniture & Fittings (YA 2009) (250,000) Claimed S19A (3 years) from YA 2009 to YA 2011

- Office Equipment (YA 2008) Fully claimed Claimed S19A (3 years) from YA 2008 to YA 2010

- SGB 9856 (YA 2007) private car : no claim No BA/BC Sold (YA 2011) : no BA/BC

Additions to fixed assets

- SGB 90 - private car No claim

- Computers, servers & printers Claimed S19A (1 year)

- Enhanced PIC for Computers, servers & printers (150%) (350,000) (525,000)

(Combined cap at 600K)

- Desks & Cabinets (each costing < $1,000) Claimed 1 year under

concession

(15,000) Photocopying machine – S19A (Enhanced claim - 2 year) 75% x 8k (6,000)

- Energy-efficient equipment under HP terms Claimed S19A (1 year)

YA 2011

Downpayment $100,000

Instalments paid $40,000 x 6 = $240,000 (exclude interest)

Incurred in YA 2011 $340,000

(340,000)

1,736,141Add Non-Business Income

Singapore dividend from Grace Pte Ltd - One-tier Exempt Foreign dividends from Country A – (Temporary liberalization) Exempt Interest income - Singapore Bank 7,500 Interest income from Australia 15,000 Branch profits – Country X [S13(8)/(9)] Exempt Branch profits – Country Z (Temporary liberalization) Exempt Statutory Income 1,758,1 Less approved donations

Cash donations to

- NKF (2 June 2009) (12,500) - Community Chest (1 Feb 2010) (20,000)

Chargeable Income 1,726,141 Less Group relief

Grace Pte Ltd's

- YA 2011 CA (355,000) - YA 2011 losses (453,000) - YA 2011 donations (6,000)

Chargeable Income before exemption 912,141 Less Exemption (Partial) (152,500) Chargeable Income after exemption 759,1

Tax @ 17% 129,139 Less Double Tax Relief (Australia Interest)

Lower of

- Foreign tax $2,250

OR

- Singapore tax (15,000 / 1,758,1x 129,139) = $1,101 (1,101)

Net tax payable 128,038 N1

This interest is part of trade income and taxable even if it is not received in Singapore N2

Voluntary CPF

(14.5% x 1.5k x 12) + [(14.5% x (40k – 22.5k)] = 5,148(b)

Carry back

Rivon can elect to carry back its YA 2012 unabsorbed capital allowances and losses (together known as qualifying deductions) to the immediate preceding year of assessment if the shareholder’s test is met.

For capital allowances, the shareholders of the company on the first day of the year of assessment in which the capital allowances arose must be substantially the same as the shareholders on the last day of immediate preceding year of assessment in which the capital allowances are to be utilized. In addition, the same trade test must be fulfilled.

For losses, the shareholders of the company on the first day of the year in which the losses were incurred must be substantially the same as the shareholders on the last day of the immediate preceding year of assessment in which the losses are to be utilized

The amount to be carried back is the lowest of the immediate preceding year of assessment (YA 2012) assessable income, the qualifying deductions or $100,000. Capital allowance must be carried back before losses.Carry Forward

Any amount that cannot be set off against YA 2011 income will be carried forward. The carried forward amount must be considered for deduction as soon as there is profit for future year of assessment. The carried forward amount will only be allowed for deduction if the shareholder’s test is met.

For capital allowances, the shareholders of the company on the last day of the year of assessment in which the capital allowances arose must be substantially the same as the shareholders on the first day of the year of assessment in which the capital allowances are to be utilized. In addition, the same trade test must be fulfilled.

For losses, the shareholders of the company on the last day of the year in which the losses were incurred must be substantially the same as the shareholders on the first day of the year of assessment in which the losses are to be utilized.

Based on Rivon’s YA 2011 tax computation, the amount of YA 2012 qualifying deductions that can be carried back is as follows:

Capital allowance $60,000

Losses $40,000

----------

Total restricted to $100,000

----------

Thus YA 2011 tax liability will be reduced by 17% x $100,000 = $17,000

Balance of YA 2012 loss c/f = $10,000

(c)

Conditions for Group Relief

1. The transferor and claimant companies are Singapore incorporated companies

who had jointly made an election to go for group relief by submitting Form GR-A (by transferor) and Form GR-B (by claimant) together with their annual tax returns indicating the priority in which it will transfer or receive the loss items.

2. The transferor and the claimant companies must have the same accounting year-

end. In order to elect for Group Relief, the transferor or the claimant may change their accounting year-end. As a result, the amount to be transferred for that YA when the change takes place may need to be time-apportioned

3. The transferor and the claimant companies are members of the same group on

the last day of the basis period which means :-

– one is at least 75%* beneficially owned, directly or indirectly by the other

– both are at least 75%* beneficially owned, directly or indirectly by another Singapore incorporated company

(*) 75% shareholding is based on ordinary shares which carry a right to variable profit participationQuestion 2

Melvyn and Ann

Tax Computation for Year of Assessment 2011

Melvyn Ann

$ $ $ $ Employment

Salary 75,000

Non-contractual bonus 15,000

Contractual bonus 0

Leave pay 3,000

Transport allowance 5,000

Hong Kong Trip 8,000

Voluntary CPF contributions

15k – [(14.5%x8x4.5k) + (15%x4x4.5k)

+ (15%x15k)] 4,830 110,830

Partnership (sleeping partner)

Adjusted profit 62,200

Less Nicholas salary (36,000)

Less Interest on capital (1.5K+3.5k) (5,000)

Divisible profit 21,200

X 25%

Melvyn's share of divisible profit 5,300

Interest on capital 1,500

Melvyn’s share of adjusted profits 6,800

Less share of capital allowance (900) 5,900

Rental Income

Net / Gross Rental income 9,000 20,000

Less expenses

Replacement of air-con(5,000)

Property tax (3,840) Mortgage interest (15,000) Maintenance (2,400)

4,000 (1,240)

Transfer rental deficit(1,240)2,7601,240Nil Other income

Purchased annuity Exempt

Profits from sale of investment 0Sole Proprietorship

Accounting loss (50,000)

Ann’s salary 36,000 Depreciation 1,000

Adjusted loss (13,000)

Transfer to Melvyn 13,000 0

Statutory Income119,4900 Less approved donations

Cash to Community Chest ($5k x 2.5) (12,500)

Computer to Children’s Aid Society

0 Assessable Income 106,990 Nil Less transfer of Adjusted loss (13,000)

93,990

Less personal reliefs

Earned Income 1,000

Qualifying child relief 4,000

NS men relief (active)1,500

CPF contribution relief 13,800

(20% x $54,000 + $15,000)

(20,300)

Chargeable Income73,690Nil

Tax on the first $40,000900

Tax on the balance $33,690 @ 8.5%2,8

Tax payable 3,7(b)

If Ann elects to transfer the year of assessment 2011 adjusted loss of $13,000 to Melvyn, this will lead to a tax savings of $1,105 (8.5% x 13,000) in year of assessment 2011 for the couple.

However, if Ann is expecting her sole proprietorship business to be highly profitable in year of assessment 2012, it may be more beneficial for her to carry forward the year of assessment 2011 adjusted loss of $13,000 to set-off against the profits in year of assessment 2012. This is especially so if her ultimate chargeable income is higher than $80,000 which will lead to her marginal tax rate being higher than 8.5% (which is the MTR for Melvyn in YA 2011).

On the other hand, if her expected marginal tax rate in year of assessment 2012 is 8.5% or below, it would be more beneficial for her to elect for the transfer in year of assessment 2011.Question 3

Option 1 – Partnership

In a partnership structure, the partnership is not a taxable person. Instead, the tax is imposed on the partners based on their share of profits in the partnership.

Under this option, the loss in the YA 2012 of $22,500 can be offset against Cherie’s employment income of $480,000, resulting in an assessable income of $457,500 in year of assessment 2012 There is therefore an immediate cash flow benefit of $4,500 (20% x 22,500)

However, in the subsequent years of assessment, Cherie’s taxable income from the partnership will be taxable at the marginal tax rate of 20% as her employment income is in excess of $320,000. This rate is higher than the regular corporate tax rate of 17%.

Option 2 – Company

A company is a separate legal and taxable entity. Hence, under this option the tax loss cannot be relieved against Cherie’s employment income.

The company itself can carry forward the year of assessment 2012 tax loss of $15,000 and the unabsorbed capital allowances of $10,000 and set these off against its future taxable income, subject to meeting the continuity of ownership test, and in addition, the carry forward of the unabsorbed capital allowances is subject to a further test, which requires the continuity of the same trade or business.Due to the tax loss and unabsorbed capital allowances in the year of assessment 2012, the company will have its first chargeable income in the year of assessment 2013; and in the first three years of assessment, the company’s chargeable income

will be taxed as follows:

– the first $100,000 – tax exempt;

– the next $200,000 – 50% tax exempt; and

– the balance – taxed at 17%.

The tax payable of the company will therefore be nil in year of assessment 2013 and $2,125 in year of assessment 2014.

There is no further tax payable on any dividends distributed by the company out of

the after-tax profits under the one-tier system.

Recommendation

Though there is a tax deferral under Option 1, it is more beneficial for Cherie to operate the business as a company (Option 2) as this structure will result in a lower

tax rate in the future years.

Appendix

YA 2012 YA 2013 YA 2014

Net profit / Loss

Add depreciation Adjusted profit / (loss) (21,000)

6,000

(15,000)

51,000

9,000

60,000

131,000

9,000

140,000

Capital allowance claim 10,000

(30k / 3 yrs)

15,000

(30k / 3 yrs)

+

(15k / 3 yrs)

15,000

(30k / 3 yrs)

+

(15k / 3 yrs)

Option 1 – Partnership (Cherie has 90% interest)

YA 2012 YA 2013 YA 2014

Divisible profits / (loss) Less CA

Employment Income Assessable Income (13,500)

(9,000)

(22,500)

480,000

457,500

54,000

(13,500)

40,500

480,000

520,500

126,000

(13,500)

112,500

480,000

592,500

Option 2 – Company

YA 2012 YA 2013 YA 2014

Adjusted profit / (loss) YA 12 CA b/f

YA 13 CA

YA 14 CA

Less YA 12 Loss b/f CI before exemption Less exemption

First $10k @ 100% First $100k @ 100% Bal $25k @ 50%

Tax @ 17%

60,000

(10,000)

(15,000)

25,000

(15,000)

10,000

(10,000)

Nil

140,000

(15,000)

125,000

125,000

(100,000)

(12,500)

12,500

2,125Question 4

Wonderful Pte Ltd

Claim of Industrial Building Allowance and Capital Allowance

for Year of Assessment 2011

Industrial Building A$

Qualifying cost - YA 2004 2,500,000

Less IBA

IA - YA 2004 (25% x $2.5m)(625,000)

AA - YA 2005 to 2010

(450,000)(1,075,000)

(3% x $2.5 x 6 years)

TWDV = Residue of Expenditure before sale1,425,000

Proceeds3,600,000

Balancing Charge 2,175,000

Balancing Charge – YA 2011 (Restricted)1,075,000

Industrial Building B

Qualifying cost - YA 20113,000,000

IBA Claim

AA - YA 2011 (3% x $3m)90,000(90,000)

Net Charge for YA 2011985,000Mechanical crane

Qualifying cost - YA 2010

- Downpayment50,000

- 9 instalments [(200k - 50k) / 20 x 9]67,500

117,500

Qualifying cost - YA 2011

- 11 instalments [(200k – 50k) / 20 x 11]82,500

Total Qualifying cost 200,000

YA 2011 CA Claim - S19A (2 years)

QC in YA 2010 (117,500 x 25%)29,375

QC in YA 2011 (82,500 x 75%)61,87591,250

Machinery

Purchase cost 500,000

Incidental cost to alter the building to house the machine100,000

Qualifying cost - YA 2011600,000

CA Claim

S19A (2 years) – (75% x 600,000)450,000

Total CA Claim for YA 2011541,250(b)

A building or structure would qualify as an industrial building or structure if it were used for the purposes of (state any four):

(1) a transport, dock, water or electricity undertaking;

(2) a trade which consists in the manufacture of goods or materials or the subjection

of goods or materials to any process;

(3) a trade which consists in the storage of goods or materials which are to be used

in the manufacture of other goods or to be subjected, in the course of a trade, to any process;

(4) a trade which consists of the storage of goods or materials on their arrival in

Singapore;

(5) research and development activities by a research and development organisation

for any manufacturing trade or business;

(6) the welfare of workers employed by the trade or undertaking that is carried on in

an industrial building or structure.Question 5

(a)

(1)

SC must account for output GST of $3,271 ($50,000 x 7/107) on this standard-rated supply with the value of $46,729 ($50,000 x 100/107). The time of supply is the date of the tax invoice which is 5 May 2011* for which the value and GST amount is to be included in the GST return for the quarter ended 30 June 2011.

* Time of supply

Date of Invoice 5 May 2011

Date of Payment (Date of presentation to the bank) 7 May 2011

The time of supply is the earliest of the above 2 dates, which is 5 May 2011.

(2)

SC must account for output GST of $560 (7% x $8,000) on this standard-rated supply with the value of $8,000 in the GST return for the quarter ended 30 June 2011. Bad debt relief can be claimed in the quarter ended 30 June 2011 in respect of the $560 output tax which is not recoverable from Mary (the bankrupt receivable)(3)

Business gifts made in the course or furtherance of the business is considered a deemed supply if the amount exceeds $200 or there is a series of 3 gifts or more over a period of 3 months provided input tax had been claimed.

In this case, SC purchased the hamper from a GST registered company, therefore input tax of $35 (7% x $500) would be claimed in the GST return for the quarter ended 30 June 2011.

In addition, as the cost of the hamper exceeded $200 it is considered a deemed supply. As a result, output tax of $35 and the value of $500 would be included in the GST return for the quarter ended 30 June 2011.

(b)

Elsie’s Assessable Income

YA 2011

$ YA 2012

$

Employment Income

YA 2010 Adjusted loss (40% x 200k) YA 2011 Adjusted loss (40% x 60k) Assessable Income

72,000

(72,000)

(max)

Nil

84,000

(8,000)

(20,000)

(max)

56,000

YA 2010 Adjusted loss c/f YA 2011 Adjusted loss c/f Total relevant deductions

8,000

NA

72,000

--

4,000

100,000