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Paper P6 (SGP) - 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 7 June 2013 The Association of Chartered Certified AccountantsSUPPLEMENTARY INSTRUCTIONS1. 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 $.

Professional Level – Options Module Time allowed Reading and planning: 15 minutes Writing: 3 hours This paper is divided into two sections: Section A – BOTH questions are compulsory and MUST be attempted

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Transcription of Paper P6 (SGP) - 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 7 June 2013 The Association of Chartered Certified AccountantsSUPPLEMENTARY INSTRUCTIONS1. 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 $.

2 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 $10,000 of chargeable income is 75% exempt7,500 Next $290,000 of chargeable income is 50% exempt145,000 To t a l152,500 Full tax exemption for new start-up companies$First $100,000 of chargeable income is 100% exempt100,000 Next $200,000 of chargeable income is 50% exempt100,000 To t a l200,000 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)

3 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)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 4 Section A BOTH questions are compulsory and MUST be attempted1 United Diversified Group Limited (UDGL) is the parent company of a diversified group, all of whose companiescurrently operate only in Country A. Country A has a standard corporate tax rate of 30% and so far has not concludeda comprehensive double taxation agreement with Singapore. The UDGL group chairman has heard that because ofits competitive tax regime, Singapore will be an ideal location to expand the Group s business in start with, the Group is looking to form an overseas holding company in Singapore which will eventually be theheadquarter base for a number of operating companies, both in Singapore and elsewhere in the Asia Pacific Singapore, the companies would most likely focus on the medical sector, as the Group is looking at transferring thesoftware and systems technologies it has developed relating to the cross-border sharing of medical information,including intellectual properties (IPs), from the UK to Singapore.

5 Once it has become more established in the region,the Group will also consider developing its own research and development (R&D) capabilities in the medical field inSingapore. It is envisaged that some of the companies in Singapore will be in tax paying positions whilst others may not exploring the various tax incentives in IP transfer and R&D, the Group would also like to optimise its overalltax position, taking into account the group relief system in :As an external tax advisor, you have been tasked to advise the group chairman of United Diversified Group Limitedon all pertinent Singapore tax issues in relation to the Group s planned activities in Singapore. Specifically, youhave been asked to provide him with a letter which addresses the following tax issues:(i) the reasons why Singapore is generally regarded as an ideal country in which to locate overseas holdingcompanies;(7 marks)(ii) the tax incentives available for qualifying headquarters companies;(10 marks)(iii) the tax incentives available for the setting up of research and development (R&D) activities;(6 marks)(iv) the tax incentives available for the transfer of intellectual properties to Singapore; and (5 marks)(v) whether there would be any tax disadvantages from the setting up of a separate company to undertake theR&D activities.

6 (3 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[ January 2012, Green Ultrotech Pte Ltd (GUPL) commenced the manufacture of a green product which has beendesignated as a pioneer product in Jurong Island. GUPL was awarded pioneer status for five years with the production day set on 1 January addition to the pioneer product, GUPL was allowed to carry on a separate following are details of the net profits for the year ended 31 December 2012 for both GUPL s pioneer and non-pioneer trades:Pioneer Non-pioneer Total $$$Sales 4,000,000 1,000,000 5,000,000 Interest on fixed deposit account 6,400 4,600 11,000 Donations to approved institutions of public character(8,000)(2,000)(10,000)Non-deduc tible expenses (1,230,000)(15,000)(1,245,000)Other deductible expenses (2,400,000)(980,000)(3,380,000) Net profit 368,400 7,600 376,000 Capital allowances available $50,000 Required:(a) Compute the pioneer profits and tax payable by Green Ultrotech Pte Ltd (GUPL) for the year of assessment2013, assuming abatement of the pioneer income applies to the company.]

7 (13 marks)(b) Recalculate the pioneer profits and tax payable by GUPL for the year of assessment 2013, assuming that: due to a higher quantum of deductible expenses, the company incurs a non-pioneer loss of $46,000(instead of $7,600 profit); and the Comptroller is NOT satisfied that this loss was not incurred to obtain a tax advantage. Note: All other factors remain the same as in part (a).(8 marks)(c) State the reasons which may satisfy the Comptroller that the loss under (b) was not incurred to obtain a taxadvantage.(4 marks)(25 marks)6 Section B TWO questions ONLY to be attempted3 Rejuvenate Conglomerate Pte Ltd (RCPL) is a construction company incorporated and tax resident in Singapore since2008. In addition to undertaking its own construction projects in Singapore, RCPL also sells related constructionmaterials and provides construction-related services to customers in Asia.

8 During the year 2012, personnel from RCPL travelled frequently to Asian countries in search of further businessopportunities and to liaise with end-customers directly or indirectly through a network of agents or brokers. All of theAsian countries concerned have concluded comprehensive double taxation agreements with 1 July 2012, RCPL decided to second a country finance manager and a country general manager, bothSingaporean citizens, to Country X for a three-year period to oversee the day-to-day operations relating to aconstruction project there. To ensure that the two Singaporeans are not worse off as a result of their posting, RCPL would like to implement any tax policies which will help them.

9 Amongst other initiatives, RCPL is considering a taxequalisation or tax protection policy. Country X has concluded a comprehensive double taxation agreement with Singapore which follows the OECD corporate tax rate of Country X is 25%. Individual tax rates in Country X are higher than those in Singapore forcomparable chargeable incomes. Required:(a) (i) Discuss how the existence of a permanent establishment (PE) is determined in the case of a countrywith which Singapore has concluded a double taxation agreement.(7 marks)(ii) Explain the Singapore tax consequences for Rejuvenate Conglomerate Pte Ltd (RCPL) if its activities areconsidered to constitute a permanent establishment in one or more Asian countries.

10 Your explanationshould include the situation where RCPL incurs tax losses on its Singapore activities.(6 marks)(b) (i) Assuming the two employees of RCPL who are seconded to Country X are exposed to individual incometax in Country X, outline the potential protection they can seek from the Singapore/Country X tax treaty;(3 marks)(ii) Explain the effect of (1) a tax equalisation policy; and (2) a tax protection policy and state, with reasons, whether or not in the case of the two employees, the chosen policy will makeany difference to RCPL.(4 marks)(20 marks)7[ (a)Supreme Apps Limited (SAL) is a company incorporated and tax resident in Country Y. SAL has had a branchregistered in Singapore since 2008. The branch operates quite independently from SAL s head office in Country is contemplating entering into a contract with a Singapore tax resident company to help the latter createcertain mobile phone applications.]


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