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Advanced Taxation (Singapore) - ACCA Global

Professional Level Options ModuleTime allowedReading and planning:15 minutesWriting:3 hoursThis paper is divided into two sections:Section A BOTH questions are compulsory and MUST be attemptedSection B TWO questions ONLY to be attemptedTax rates and allowances are on pages 2 4Do NOT open this paper until instructed by the reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet untilinstructed by the question paper must not be removed from the examination P6 (SGP) Advanced Taxation (Singapore) Friday 6 December 2013 The Association of Chartered Certified AccountantsSUPPLEMENTARY INSTRUCTIONS1.

SUPPLEMENTARY INSTRUCTIONS 1. You should assume that the tax rates and allowances for the year of assessment 2013 will continue to …

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Transcription of Advanced Taxation (Singapore) - ACCA Global

1 Professional Level Options ModuleTime allowedReading and planning:15 minutesWriting:3 hoursThis paper is divided into two sections:Section A BOTH questions are compulsory and MUST be attemptedSection B TWO questions ONLY to be attemptedTax rates and allowances are on pages 2 4Do NOT open this paper until instructed by the reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet untilinstructed by the question paper must not be removed from the examination P6 (SGP) Advanced Taxation (Singapore) Friday 6 December 2013 The Association of Chartered Certified AccountantsSUPPLEMENTARY INSTRUCTIONS1.

2 You should assume that the tax rates and allowances for the year of assessment 2013 will continue to apply forthe foreseeable All apportionments should be made to the nearest Calculations and workings need only be made to the nearest $.4. All workings should be RATES AND ALLOWANCESThe following tax rates and allowances are to be used in answering the questionsGoods and services taxStandard rate7%Registration threshold$1 millionStamp dutyPurchase or transfer of immovable propertyPurchase price or market valueEvery $100 or part thereof of the first $180,000$1 Every $100 or part thereof of the next $180,000$2 Thereafter, every $100 or part thereof$3 Transfer of sharesPurchase price or net asset valueEvery $100 or part thereof$0 20 Corporate income tax rateYear of assessment 201317%Partial tax exemption$First $10.

3 000 of chargeable income is 75% exempt7,500 Next $290,000 of chargeable income is 50% exempt145,000 Total152,500 Full tax exemption for new start-up companies$First $100,000 of chargeable income is 100% exempt100,000 Next $200,000 of chargeable income is 50% exempt100,000 Total200,000 2 Central Provident Fund (CPF)Contributions for individuals below the age of 50 years and earning more than $1,500 per monthEmployeeEmployerRates of CPF contributions (from 1 September 2011)20%16%Maximum monthly ordinary wages (OW) attracting CPF(from 1 September 2011)$5,000 For the year 2012 ( from 1 January 2012 to 31 December 2012)Maximum annual ordinary wages (OW) attracting CPF$60,000 Maximum annual additional wages (AW)

4 Attracting CPF$85,000 less OW subject to CPFP ersonal income tax for the year of assessment 2013 Chargeable incomeTax rateTax$%$On the first20,00000On the next10,0002 0200 On the first30,000200On the next10,0003 5350 On the first40,000550On the next40,0007 02,800 On the first80,0003,350On the next40,00011 54,600 On the first120,0007,950On the next40,00015 06,000 On the first160,00013,950On the next40,00017 06,800 On the first200,00020,750On the next120,00018 021,600 On the first320,00042,350 Above320,00020 03[ income tax reliefs for the year of assessment 2013 Earned incomeNormal (max)Handicapped (max)Below 55 years$1,000$4,00055 to 59 years$6,000$10,00060 years and above$8,000$12,000 Spouse relief$2,000 (max)Qualifying child relief (per child)$4,000 Handicapped child relief (per child)$5,500 Working mother s child relief (WMCR)% of mother s earned incomeFirst child15%Second child20%Third and subsequent child25%Maximum cumulative WMCR100%Maximum relief per child$50,000 Grandparent caregiver relief$3,000 Life assurance relief$5,000 (max)]

5 Voluntary CPF contribution of self-employedCapped at $30,600 or 36% of (1)(a)assessable income whichever is lowerCourse fees$5,500 (max)NSmanNormal appointment Key appointmentholderholderActive NSman$3,000$5,000 Non-active NSman$1,500$3,500 Wife/widow/parent of NSman$750$750 Foreign maid levy$6,360 (max)4 Section A BOTH questions are compulsory and MUST be attempted1 Hori Construction Private Limited (HCPL) is an engineering and construction services company incorporated and taxresident in Singapore since 2007. It is owned equally by two Singapore individual shareholders, who are also directorsof the company.

6 HCPL has been registered for goods and services tax (GST) in Singapore since 2008. HCPL has had an impressive track record of profitability in recent years and is now contemplating a public listing inSingapore. To prepare for the initial public offer (IPO), HCPL will contract with a number of external professionalservice providers such as lawyers, accountants and IPO advisers from 2012. The two existing HCPL shareholders each propose to transfer their shareholding in HCPL to a newly incorporatedcompany, Hori Holdings Limited (HHL), in return for an equivalent shareholding in HHL. HHL will operate as thelisting vehicle for the IPO.

7 Rather than operating as a mere investment holding company, HHL will, for a fee, providemanagement services to HCPL and any other future subsidiaries, which will encompass accounting, informationtechnology, legal and human resource services. Key personnel with the relevant skills to provide these servicescurrently employed in HCPL will also be transferred to the listing will take place in Singapore, the potential investors in HHL may be individuals or companies and mayor may not be tax residents in :As the company s tax adviser, draft a letter to the Board of Directors of Hori Construction Private Limited (HCPL)advising them on all the pertinent Singapore tax issues relevant to the following:(i) the transfer of shares from HCPL to Hori Holdings Limited (HHL) by the existing HCPL shareholders.

8 (5 marks)(ii) for the potential investors in HHL (corporate and individual, resident and non-resident): their general Singapore income tax position, and the specific tax issues relating to their purchase, ownership and disposal of shares in HHL;(18 marks)(iii) the related goods and services tax (GST) issues relevant to HCPL and HHL.(8 marks)Professional marks will be awarded in question 1 for the appropriateness of the format, presentation and structureof the letter, the effectiveness with which the information is communicated and its logical flow.(4 marks)(35 marks)5[ Pte Ltd (SPL) is a manufacturing company incorporated and tax resident in Singapore since 2010.]

9 Due toincreased demand for its consumer products and space constraints in its existing factory in Singapore, SPL intendsto move the manufacturing of its products to Johor Bahru in Malaysia, by means of an outsourcing arrangement withCompany packaging equipment is needed for the manufacturing of SPL s products and other companies cannot imitatethis technology. Therefore, SPL intends that the outsourcing of the manufacture of its products to Company M is doneunder the company s tight part of the transfer of the manufacturing of its products to Company M, SPL will:1. Lease the machine currently used for packaging its products to Company M at no Buy new equipment for the manufacture of its products and lease it to Company M at no consideration.

10 3. Buy the raw materials for the products and give these to Company M at no consideration to enable Company Mto start manufacturing its products. SPL intends to procure these raw materials from a supplier in Malaysia, whois a tax resident in Malaysia, and allow the supplier to deliver the raw materials directly to Company M. Thesupplier will invoice SPL for the raw materials supplied to Company M will rent a factory in an industrial park in Johor Bahru (which will be completed in March 2014)especially for the manufacturing of SPL s products. Company M will hire its own staff for the operation of this factoryand the related packaging activities and it will also pay for all other expenses, such as electricity and salaries for Company M manufactures the products, some of the finished products will be delivered to SPL in Singapore,some will be delivered directly to SPL s customers in Malaysia and some will be exported directly to SPL s overseascustomers in countries other than Malaysia and intends to pay Company M a pre-agreed commission on a monthly basis as an outsourced processing fee.


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