cat/fia (ftx)

Mock Examination : CAT Paper FTX

Foundations In Taxation

Session : December 2012

Set by : Ms Lisa Foo

Your Lecturer

Ms Lee Yuet Lai

Ms Lisa Foo

Your Mailing Address : ______________________________________

______________________________________

Your Contact Number : ______________________________________

I wish to have my script marked by my lecturer and

collect the marked script at the SAA-GE Reception Counter

have the marked script returned to me by mail

(Please submit your script latest by 12th November 2012 for marking)

SAA GLOBAL EDUCATION CENTRE PTE LTD

Company Registration No. 201001206N

20 Aljunied Road, #01-04, CPA House,

Singapore 389805

Tel: (65) 6744 9700 Fax: (65) 6744 9796

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

FOUNDATIONS IN TAXATION

FTX (SGP)

MOCK EXAMINATION FOR

DECEMBER 2012

Time Allowed : 2 hours

Tax rates and table provided

Please refer to the Provision for Furnishing in Revision Kit

Section A : All ten questions are compulsory and must be attempted

1. On 1 May 2011, Sicily Limited made a cash donation to an approved IPC for amount

$5,000 in return for advertising space in their monthly magazine which would

normally cost $1,500. How much is the tax deduction ?

A $3,500

B $8,750

C $12,500

D $3,750

2. If a non-Singaporean citizen employee decides to leave Singapore for more than

___________ months, IR21 has to be submitted 1 month or shorter.

A 1

B 6

C 2

D 3

3. A company's year end is 31 October 2012, when is the due date for filing ECI?

A 31 January 2013

B 30 April 2013

C 30 November 2013

D 31 December 2012

4. Lang was retrenched during the year 2011. The company gave Lang a retrenchment

package as follows :

$

Gratuity for past services 50,000

Payment in lieu of notice 40,000

Compensation for loss of office 150,000

What is the taxable amount ?

A $90,000

B $240,000

C $150,000

D $190,000

5. Under the PIC scheme, if businesses opt for the Cash Payout option, how much is the

maximum cash payout for YA2011 and YA 2012 combined?

A $200,000

B $30,000

C $60,000

D $800,000

6. Grandparent Care-giver Relief of $3,000 is granted under the following conditions :

A Child is Singapore citizen and 12 years and below, care-giver is not carrying

on a trade, business, profession, vocation or employment

B Child is Singapore citizen and 16 years and below, care-giver is not carrying

on a trade, business, profession, vocation or employment, care-giver is living

in Singapore

C Child is Singapore citizen and 16 years and below, care-giver is not carrying

on a trade, business, profession, vocation or employment, relief can be given

to husband or wife

D Child is Singapore citizen and 12 years and below, care-giver is not carrying

on a trade, business, profession, vocation or employment, relief can be given

to husband or wife

7. Calculate the tax payable for a new company qualifying for full tax exemption with a

trade income of $380,000 :

A $30,670

B $30,600

C $13,600

D $47,600

8. The relevant dates for carry forward of unabsorbed wear and tear allowances are :

A last day of the Y/A which the capital allowance arose ; first day of the Y/A

which the capital allowance is to be utilised

B first day of the Y/A which the capital allowance arose ; last day of the Y/A


C last day of the year which the capital allowance arose ; first day of the Y/A


C last day of the Y/A which the capital allowance arose ; first day of the year


9. Mebro Store sells a sofa set for $525 (GST inclusive) in exchange for an old cabinet

for $100 (supply is for partly non-monetary consideration)

How much is the value of supply ?

A $34.35

B $525

C $107

D $490.65

10. QBA6543Y, a car was bought in Jan 1998 for $70,000 and sold in July 2006 for

$60,000. The company's year end is 31 January each year.

Compute the balancing charge for the relevant YA

A $30,000

B $10,000

C $70,000

D $23,000

Section B : All nine questions are compulsory and must be attempted

Q1

Mr Paul Tan, a Singapore citizen, is the sole-proprietor of Paul Tan Consultancy. The

following was computed for YA 2012 :

Adjusted profits $98,500

Capital allowances $9,200 (as agreed with the Comptroller of Income Tax)

He also sits on the board of directors of Expat Services Pte. Ltd. The amount of director fees

declared was $30,000. It was voted and approved for payment at the annual general meeting

held on 31 March 2012.

His wife, Ada Tan, a Singapore citizen, received salary of $108,000 and bonus of $12,000

during the year 2011.

Ada Tan is also a sleeping partner of Rayne Trading. Profit distributed to her for year of

assessment 2012 was $5,000.

They are both staying with Ada Tan's mother, who is fully maintained by them.

They have two children, Ashley born in year 1997 and Ashton, born in year 2005.

Paul Tan is a non-key command and staff appointment holder

The following additional information below relates to Mr Paul Tan and his wife Ada Tan for

the year ended 31 December 2011 :

Paul Tan Ada Tan

1973 1974

Interest from OCBC Bank 500 -

Singapore one-tier dividend - 1,080

Net Rent/(Net Deficit Rent) 9,870 (2,030)

Donations (IPC)

NKF 700 -

Singapore Cancer Society 700 300

Moral Society - 900

Foreign Maid Levy 3,180 -

Course Fees - 4,500

Statutory CPF Contributions 15,200

Medisave Contributions 4,020

Election to offset deficit rent is available to Mr Paul Tan and Ada Tan

Required

Compute the minimum tax liabilities of Mr Paul Tan and Ada Tan for the year of assessment

2012.

Q2

Ergo Pte Ltd is a company incorporated in year 2001. The company is a wholesaler of office

furniture.

The Trading, Profit and Loss Account of the company for the financial year ended 30 June

2011 is provided below :

Notes $

Sales

2,850,880

Less : Cost of Goods Sold Purchases

1,076,520

Freight and handling charges

229,920

1,306,440

Gross Profit

1,544,440

Add : Other Income

1 8,200

1,552,640

Less : Expenses General and

Admin

2 566,700

Staff

3 420,600

Selling and Distribution

4 327,550 Finance and others

5 45,800

1,360,650

Net Profit before Tax

191,990

Notes to the accounts : $

(1) Other income consists of :

Gain on sale of fixed assets 4,900

Interests from banks 3,300

(2) General and Admin :

Depreciation - equipment 282,000

Insurance - equipment 65,600

Legal fee : renew tenancy agreement 3,500

Subscriptions - Furniture Association 5,500

ACRA penalty 1,500

Doubtful debts - general provision 34,600

Rental - office and factory 174,000

(3) Staff :

Salary & Wages 220,500

CPF contributions 71,700

Directors' salaries & bonus 120,000

Directors' fees 8,400

(4) Selling and Distribution :

Marketing & PR 201,400

Advertising & Promotions 126,150

(5) Finance and Others :

Bank interest 40,100

Late payment interest 5,700

Required

Compute the company's income tax liability for Y/A 2012

Q3

Elle Ltd incurred the following expenses for the construction of an industrial building during

the year :

$

1. Cost of land 2,250,000

2. Legal fees for land purchase 8,200

3. Cost of construction of canteen 80,000

4. An office in the factory 26,000

5. Cost of installing fittings 32,000

6. Interest for loan on construction 39,400

7. Architect fees for construction 29,300

8. Cost of building roads in factory 13,600

Required

Determine the qualifying cost for computing IBA

Q4

Crossroad Bakey is incorporated on 1 January 2010. The financial year end is 31 December.

The details of their assets are :

Date of Asset Cost

Purchase Type S$

15/05/10 Machine (semi automatic) 15,000

30/05/10 Office Furniture 9,000*

12/09/11 Computers 19,000

10/10/11 Baking Machine (fully automatic) 8,000

* Bought on hire purchase :

Deposit paid is 30%, paid over 36 instalments. The first instalment was due on

01/06/10. Total hire purchase interest was $1,800.

Required

Calculate the maximum amount of wear and tear allowance claimable for year of assessment

2012.

Q5

Section 21 Election provides that a taxpayer may elect for any balancing charge for an old

asset to be offset against the cost of the new asset. However, taxpayer must also take note of a

few effects of electing Section 21.

List two effects of electing Section 21 :

(i)

(ii)

Section 24 provides that a taxpayer may avoid balancing adjustments if he makes a joint

election with the buyer.

List two effects of electing Section 24 :

(i)

(ii)

Q6

Sam Brown is the General Manager of CVC Pte. Ltd. He has been working in Singapore

since 2009. His remuneration for the year was $185,000. He received the following benefits

from the company during the year 2011 :

(a) He was provided with a car and a chauffeur. The car costs $180,000, excluding COE

of $60,000. The Open Market Value if $50,000. The petrol and maintenance costs

were paid by Sam.

The chauffeur was paid a salary of $18,000 for the whole year. Statutory CPF

contributions were $3,000.

The total mileage of the car was 85,000 km for the year, of which, one quarter was for

personal use.

(b) A furnished apartment which the company paid $48,000 for annual rent and Sam

contributed $800 a month.

A gardener was engaged for the whole year. He was paid $50 a month by the

company.

The following furnishings were also provided at the apartment :

Two pieces of soft furnishing

One piece of hard furnishing

Washing machine (one unit)

Air conditioner : sitting room (one unit), bedrooms (three units)

(c ) The company also paid for the trips for Sam and his family to London during the

year . $2,000 was paid for one trip.

1 return trip for Sam and his wife

1 return trip for Mrs Sam Brown to attend her sister's wedding ceremony

3 return trips for Sam Brown's daughter

Required

Calculate the amount of benefits in kind assessable on Sam Brown for Y/A 2012

Q7

For each of the below :

(a) Franco is working in GreenLand Development Ltd for the year 2011. He received a

25% discount on a $1.5 million condominium at Ocean Lane from the company when

he bought the property. His cousin is only given a 5% discount as his cousin is not

working at GreenLand Development Ltd. Franco is still holding on to the

condominium at present.

Required

Calculate any taxable income for Franco for Y/A 2012?

(b) Heather was working at Jurgen Ltd in year 2011. Her monthly salary was $15,000 a

month for the whole year. The company contributes CPF based on the salary drawn

by staff. Recently, Heather attended the Basic Taxation Course and realised that the

excess CPF contributions above the statutory in year 2011 will be taxable income on

the employee. She was shocked as she will have to pay additional taxes.

Required

Calculate the excess CPF contributions subject to tax for Y/A 2012.

(c ) Tamarind Ltd bought an NCD for $100,000 on 1 January 2010. The NCD will

Mature on 31 December 2013. The interest rate is 10% per annum and interest is

payable every half year on 30 June and 31 December.

On 30 July 2011, Tamarind Ltd sold the NCD to Spices Ltd for $101,500.

Required

(i) Calculate Tamarind Ltd's assessable income for Y/A 2011

(ii) Calculate Tamarind Ltd's assessable income f or Y/A 2012

Q8

Renata is the new accountant at Axily Pte Ltd. She was looking at the company's past few

years' financial statements and realized that for the past few years, Axily Pte Ltd has been

making losses and has capital allowances to be carried forward. The losses and capital

allowances can be utilised to offset the profit this year.

$

Y/E 31.10.09 Adjusted Trade Losses 110,000

Wear & Tear Allowances 15,000

Y/E 31.10.10 Adjusted Trade Losses 75,000


Y/E 31.10.11 Adjusted Trade Profit 220,000


Assume that the tests for utilisation of carried forward Wear and Tear Allowances is fulfilled.

The shareholders and shareholdings on :

31.10.09 31.12.09 31.10.10 31.12.10 31.10.11 31.12.11

Carrie

30% 45% 55% - - -

Cala

30% 50% 10% 10% 10% 10%

Cain

40% 5% 5% - - -

Cathy

- - 30% 90% 80% 80%

Cassidy

- - - - 10% 10%

Required

Compute the chargeable income before exemption for the year of assessment 2012

Q9

Organic Pte Ltd (OPL) is a company trading in organic food products. OPL's current turnover

is $910,000 for the quarter ended 31 March 2012. OPL is likely to apply to be a GST

registered trader in the next quarter as OPL is sure the turnover will be above $1,000,000 at

the end of the next quarter.

OPL has a lot of queries regarding the responsibilities of being a GST registered trader. For

each of the query listed below, state whether each is true or false. You are not required to

give a reason for your answer.

(i) OPL does not have to account for deemed output tax for fringe benefits to the

employees

(ii) Third country sales is an exempt supply

(iii) The provision of financial services is an exempt supply

(iv) The original time of supply rules will be the earlier of payment received and invoice

issues

(v) Export of goods is a zero rated supply

(vi) For failure to register as a GST registered trader, the fine will be $10,000 and more,

penalty equal to 10% of the tax due each year or part thereof since the taxpayer is

required to make the notification

************************End of Paper***************************

SUPPLEMENTARY INSTRUCTIONS

1. Calculations and workings need only be made to the nearest $.2. All apportionments should be made to the nearest month.3. All workings should be shown.

TAX RATES AND ALLOWANCES

The following tax rates and allowances should be used when answering the questions.

Selected reliefs/rebates for year of assessment 2012

Earned income reliefAge Normal HandicappedBelow 55 $1,000 $2,00055 to 59 $3,000 $5,00060 and above $4,000 $6,000

Spouse relief $2,000

Handicapped dependant spouse relief $3,500

Parents/Handicapped parents reliefNormal Handicapped

Parent NOT staying with taxpayer $4,500 $8,000Parent staying with taxpayer $7,000 $11,000

Grandparent caregiver relief (GCR) $3,000

Dependant handicapped sibling relief $3,500

Foreign maid levyThe relief is two times the amount of foreign maid levy paid in 2011 up to a maximum of $6,360.

Nsman reliefKey Non-key

command commandstaff staff

appointment appointmentholder holder

Active Nsman $5,000 $3,000Non-active Nsman $3,500 $1,500For wife of operationally ready Nsman $750 $750For each parent of operationally ready Nsman $750 $750

Provident fundCompulsory contributions to the Central Provident Fund (CPF)/approved pension or provident fund bySingaporeans and Singapore permanent resident employees, subject to not more than the statutory contributions under the Central Provident Fund Act.

CPF top-up schemeActual top-ups by individuals themselves and his/her employer capped at $7,000; andactual top-ups by individuals for family members capped at $7,000.

Voluntary CPF contributions made by self-employed persons36% of s.10(1)(a) assessable trade income capped at $30,600.

2

Life insurancePremiums paid on own life and wife’s life insurance policiesRestricted to – (1) 7% of capital sum insured

– (2) $5,000 if CPF contributions claimed is less than $5,000– (3) No claim if CPF contributions claimed exceeds $5,000.

Child reliefQualifying child relief (QCR) Per child $4,000Relief given for all qualifying children.

Handicapped child relief (HCR) Per handicapped child $5,500

Working mother’s child relief (WMCR) 1st child 15% of mother’s earned income2nd child 20% of mother’s earned income3rd and each subsequent child 25% of mother’s earned income

Maximum cumulative WMCR per child (total of WMCR + QCR/HCR) $50,000

Maximum total WMCR is capped at 100% of mother’s earned income.

Course feesRelief for course fees up to $5,500 can be claimed for eligible fees incurred on courses studied or seminars andconferences attended.

Parenthood tax rebate (PTR)1st child $5,0002nd child $10,0003rd and each subsequent child $20,000

Rebate given to all Singaporean children that are born or legally adopted on or after 1 January 2008.

3 [P.T.O.

Personal income tax rates – Part A

Chargeable income Tax rate Tax$ % $

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

On the first 30,000 200On the next 10,000 3·5 350

On the first 40,000 550On the next 40,000 7·0 2,800

On the first 80,000 3,350On the next 40,000 11·5 4,600




On the first 320,000 42,350Above 320,000 20·0

Corporate tax rates

Year of assessment Rate2012 17%

Partial tax exemption

Up to the first $10,000 of chargeable income: 75% exemptionOn the next $290,000 of chargeable income: 50% exemption

Full tax exemption for new start-up companies

Up to the first $100,000 of chargeable income: 100% exemptionOn the next $200,000 of chargeable income: 50% exemption

Productivity and Innovation Credit (PIC) – years of assessment 2011 and 2012

– 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, instead ofthe usual deduction/allowance. The annual expenditure cap of $400,000 can be pooled to give a combined cap of$800,000 for the years of assessment 2011 and 2012.

Goods and services tax

Standard rate 7%Registration threshold $1 million

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