Fundamentals Level – Skills Module Paper F6 (SGP)

1 Fundamentals Level Skills ModuleTime allowed: 3 hours 15 minutesThis question Paper is divided into two sections:Section A ALL 15 questions are compulsory and MUST be attemptedSection B ALL SIX questions are compulsory and MUST be attemptedTax rates and allowances are printed on pages 2 NOT open this question Paper until instructed by the NOT record any of your answers on the question question Paper must not be removed from the examination (Singapore)March/June 2017 Sample QuestionsPaper F6 (SGP)The Association of CharteredCertified AccountantsInstitute of Singapore Chartered AccountantsSUPPLEMENTARY INSTRUCTIONS1. Calculations and workings need only be made to the nearest $.

2 2. All apportionments should be made to the nearest All workings should be shown for Section All computations should indicate by the use of 0 any item of income or expense which is tax exempt, not taxableor does not require adjustment, as RATES AND ALLOWANCESThe following tax rates and allowances are to be used in answering the questionsGoods and services taxStandard rate7%Registration threshold$1 millionCorporate income taxRate Year of assessment 2017 17%Corporate tax rebate (capped at $20,000)50%Partial tax exemption$First $10,000 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 Central Provident Fund (CPF)Contributions for individuals below the age of 55 years and earning more than $750 per month(1 January 2016 to 31 December 2016)EmployeeEmployerRates of CPF contributions20%17%Maximum monthly ordinary wages (OW)

3 Attracting CPF$6,000 Maximum annual ordinary wages (OW) attracting CPF$72,000 Maximum annual additional wages (AW) attracting CPF$102,000 less OW subject to CPFP roductivity and innovation credit (PIC) years of assessment 2016 to 2018 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 additionto the usual annual expenditure cap of $400,000 can be pooled to give a combined cap of $1,200,000 for the years ofassessment 2016 to the PIC+ scheme for qualifying small and medium enterprises, the expenditure cap is increased from$400,000 to $600,000 per qualifying activity per year of income tax for the year of assessment 2017 Chargeable incomeTax rateTax$%$On the first20,000 On the next10,0002 0200 On the first30,000200On the next10,0003 5350 On the first40.

4 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 next40,00018 07,200 On the first200,00021,150On the next40,00019 07,600 On the first240,00028,750On the next40,00019 57,800 On the first280,00036,550On the next40,00020 08,000 On the first320,00044,550 Above320,00022 0 Personal income tax reliefs for the year of assessment 2017 Earned income reliefStandard (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$5,500 Qualifying child relief (per child)$4,000$7,500 Working mother s child relief (WMCR)% of mother s earned incomeFirst child15%Second child20%Third and subsequent child25%Maximum WMCR100%Maximum relief per child$50,000 Parent reliefStandard (max)Handicapped (max)Not living in the same household$5,500$10,000 Living in the same household$9,000$14,000 Grandparent caregiver relief$3,000 Dependent handicapped sibling relief$5,500 Life insurance relief$5,000 (max)

5 Voluntary CPF contribution of self-employedCapped at $37,740 or 37% of assessabletrade income whichever is lowerCourse fees$5,500 (max)3[ reliefNon-key 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 relief$6,360 (max)4 Section B ALL SIX questions are compulsory and MUST be attemptedPlease write your answers to all parts of these questions on the lined pages within the Candidate Answer Pte Ltd (BPL) is a goods and services tax (GST) registered trader. For the quarter ended 31 March 2017, BPLrecorded the following transactions:1. Paid $2,500 to an air courier company to deliver equipment from its Singapore warehouse to a customer Paid $3,000 to a Singapore company for the purchase of spare Invoiced a customer in Malaysia $30,000 for equipment delivered to the customer s warehouse in Malaysia bythe air courier company (as in (1) above).]

6 4. Cleared customs for equipment costing $25,000 bought from a US Paid $1,000 to SingTel, comprising IDD calls of $800 and local calls of $ Paid $1,000 to a local supplier to repair faulty equipment sold to a customer during the warranty period whichcovers both labour and Sold equipment and an extended warranty for the equipment for $5,000 and $500 respectively to a customerin Paid $12,000 and $6,000 respectively for the rental of an apartment and furniture, which is used exclusivelyby BPL s managing amounts are stated excluding any applicable GST and all the suppliers are Singapore GST registered :(a) Explain the goods and services tax (GST) treatment (output tax and input tax) of the parts used for the repairand repair service provided during the warranty period (item 6).

7 (2 marks)(b) Calculate the net GST payable by or refundable to Bastille Pte Ltd for the quarter ended 31 March each item, clearly identify the type of supply together with the amount of GST applicable, if any. For anyitem where no GST should be taken into account, state the reason.(8 marks)(10 marks)5[ 1 December 2016, maryland Pte Ltd (MPL), a Singapore incorporated and tax resident company, paid interest of$30,000 on Loan #1 and of $50,000 on Loan # loans were obtained from maryland Inc (MI), a company tax resident in Country X. There is no tax treaty betweenSingapore and Country X. The loan agreements provide that the interest is due and payable on 1 December of eachyear and that any withholding tax will be borne by #1 was brought into Singapore and used to purchase a fully automated production line used in MPL s factoryin #2 was used to purchase an office unit in Hong Kong.]

8 This office unit has been tenanted since its e-filed the withholding tax form on 1 June :(a) Explain maryland Pte Ltd s withholding tax obligations in respect of Loan #1 and Loan #2 respectively.(4 marks)(b) Calculate the withholding tax and penalties, if any, payable by maryland Pte Ltd in respect of Loan #1 andLoan #2 if it does not qualify for reduced penalties under the voluntary disclosure programme.(3 marks)(c) State the conditions which must be met for a company to avail itself of the reduced penalties under thevoluntary disclosure programme.(3 marks)(10 marks)63 Create Pte Ltd (CPL) has been a wholly owned subsidiary of Create Holding Ltd (CHL) since its incorporation.

9 Bothcompanies make up accounts to 31 December each year. There has been no change in the ultimate shareholders ofCPL or their shareholdings since its following information relates to CPL for its year ended 31 December 2016:(i) Sold an automated sorting system for $45,000. CPL had bought the automated sorting system from CHL in2015 for $60,000. Both parties made an election under Transferring Fixed Assets to Related had bought the automated sorting system at the same price ($60,000) in 2014 and claimed capitalallowances over a three-year period.(ii) Bought the following hydraulic bulking unit on hire purchase on 1 July 2016. Details of the hire purchase areas follows:$Cash price180,000 Less:Deposit(90,000) 90,000 Add:Finance charges5,400 95,400 The hire purchase payments will be made over 36 months.

10 The first instalment payment of $2,650 was due on1 July hydraulic bulking unit qualifies for a productivity and innovation credit (PIC) claim over three years. CPL didnot make any PIC cash payout claims.(iii) CPL s agreed tax adjusted profit aftercapital allowance claims for the year of assessment 2016 is $450,000 andthe tax paid is $30,575.(iv) CPL s agreed tax adjusted profit beforecapital allowance claims and balancing adjustment for the year ofassessment 2017 is $5, :(a) Compute the base capital allowances due to and the balancing adjustment required for Create Pte Ltd andCreate Holding Ltd for the automated sorting system in each of the years of assessment 2015, 2016 and2017.