TEMASEK POLYTECHNIC

SCHOOL OF BUSINESS
AY 2014/2015 April Semester
Mid-Semestral Test
(Adapted as Revision for Mid-Semestral Test for AY 2015/2016)
PRACTICE OF TAXATION (BAF3014)

TIME ALLOWED : 1 HOUR

INSTRUCTIONS TO CANDIDATES
1. This paper consists of 6 pages (including cover page and Appendix A).
2. Answer all questions.
3. Begin your answer to each question on a new page.
4. Total marks for the paper is 50.

Question 1 (7 marks)
Jun Chong buys stationery and souvenirs from online stores and sells them at the
movable kiosks in various shopping malls. At the beginning of this year, he chose to file
his income tax online. As he issued receipts only when he was free, he estimated that he
earned around $600,000 in 2013. Hence, he filled in $600,000 as his employment
income.
Required:
Jun Chong has committed some common mistakes made by taxpayers.
mistakes made by Jun Chong and explain the correct ways to file.

Identify the
(7 marks)

Question 2 (23 marks)

Park Sing Gee, a Korean, is employed by SangYong Group, a company incorporated in
Korea since 1986. This company has no permanent establishment in Singapore.
In 2014, the company decided to send Park Sing Gee to Singapore to oversee and
promote the companys interest in the Southeast Asia region. SangYong Group will
continue to credit Park Sing Gees remuneration into his bank account in Korea. He is
paid a monthly salary of S$9,600 and monthly entertainment allowance of S$600.
On 1 March 2014, Park Sing Gee arrived in Singapore with his wife and 2 daughters, aged
3 and 10. He applied to Comptroller of Income Tax and was granted area representative
status.
For the first 2 months, the family stayed at Grand City Hotel. The company paid S$10,200
for the hotel accommodation. On 1 May 2014, the family moved into a partially-furnished
apartment provided by the company. The annual value of the apartment was S$54,000.
Utility bills paid by the employer for 2014 were S$5,400.
On 1 July 2014, Park Sing Gee was also provided with a new car, SKA7878X, which cost
S$220,000 and the open market value was S$40,000. His travelling details were as
follows:
No. of km
4,600
2,400
1,500

Business trips
Home to office and vice versa
Social purpose

The company paid the following expenses for Park Sing Gee in 2014:
School fees for the older daughter
Home leave passage in Oct and Dec, $580 per person per trip
Running expenses for SKA7878X

S$
18,000
4,640
5,000

Question 2 (continued)
Park Sing Gees travel schedule in 2014 was as follows:
Dates
20 to 30 March
30 March to 10 April
22 April to 15 May
12 July to 2 September
29 September to 19 October

Countries visited
Malaysia
Indonesia
Hong Kong
Vietnam
Philippines

Park Sing Gee was paid a bonus of S$24,000 on 22 December 2014 for his work as an
area representative.
Additional information (all currencies in S$):
Taxable benefits:
i)

Provision of a car by employer:

3/7 x [(cost of car residual value)/10] + $0.55 per private mileage
3/7 x [(cost of car residual value)/10] + $0.45 per private mileage

ii)

In your answer, you are to apportion the taxable benefits, wherever applicable,
based on number of days.

Required:
Compute Park Sing Gees Singapore income tax liability for the Year of Assessment
2015. Park Sing Gee is entitled to personal reliefs of $11,000.

Number of days in Jan to Dec respectively: 31, 28, 31, 30, 31, 30, 31, 31, 30, 31, 30, 31.
(23 marks)

Question 3 (20 marks)

On 1 October 2012, Rubina and Agnes contributed $300,000 and $200,000 respectively to
start a partnership selling beauty products online. They agreed to share profits and losses
in accordance with their capital contribution.

Rubina and Agnes are entitled to monthly salaries of $2,800 and $2,500 respectively. The
partners are also entitled to interest on capital contributed at 3% per annum.

On 1 January 2013, Agnes decided to contribute additional capital of $100,000 and it was
agreed that she would be paid a monthly travelling allowance of $300 with effect from 1
January 2013.

Profits and losses will continue to be shared in accordance with the capital contribution of
the two partners and interest on capital will remain at 3% per annum.

The two partners will continue to receive their monthly salaries. In addition, each of them
will be entitled to one-month bonus in June every year.

The partnership prepares annual accounts to 30 September.

The accounts showed the following information for the year ended 30 September 2013:
$
Gross Profit

$
339,350

Gain on disposal of fixed assets

1,500
340,850

Expenses
Accounting fees

(1,725)

Cash donations to approved charities

-

on 25 December 2012

on 8 August 2013

(160)
(1,500)

Depreciation

(1,660)
(1,200)

Interest expense*

(22,075)

Legal fees re: new partnership agreement

Office rental

(3,150)
(36,000)

Salaries and bonuses*

(101,900)

Travelling allowance*

( 4,500)
4

Net Profit

168,640

* Included the amount paid to the partners.

Capital allowances agreed with the Comptroller were $14,400 for the Year of Assessment
2014. The adjusted profits are deemed to have accrued evenly over the year.
Required:
a)

Compute the adjusted profit of the partnership for Year of Assessment 2014.
(6 marks)

b)

Tabulate the partners share of the partnership profit or loss and all other
entitlements for the year from 1 October 2012 to 30 September 2013.
(14 marks)
~ End of Paper ~

AppendixA
ForYearofAssessment2014
Tax Rate Table for Resident Individuals (Part A of Second
Schedule)

Forthefirst
Forthenext
Forthefirst
Forthenext
Forthefirst
Forthenext
Forthefirst
Forthenext
Forthefirst
Forthenext
Forthefirst
Forthenext
Forthefirst
Forthenext
Forthefirst
Above

Chargeable
Income
$

Rate
%

GrossTax
Payable
$

20,000
10,000

30,000
10,000

40,000
40,000

80,000
40,000

120,000
40,000

160,000
40,000

200,000
120,000

320,000
320,000

0.00
2.00

0
200

200
350

550
2,800

3,350
4,600

7,950
6,000

13,950
6,800

20,750
21,600

42,350

3.50

7.00

11.50

15.00

17.00

18.00

20.00

Practice of Taxation
AY2014/15 April Semester
Mid-Semestral Test Suggested Solutions
(Adapted as Revision for Mid-Semestral Test for AY 2015/2016)
Question 1 (7 marks)

Filing mistakes

Correct way to file

1.

Jun Chong has wrongly declared trade Jun Chong runs a business. He is
income as employment income.
hence considered self-employed and he
should file his income as trade income.

2.

Jun Chong should not declare an He should keep proper documentation

estimated income.
and records (e.g. invoices, receipts,
vouchers and bank statements) and file
the correct amount of income.
He should submit a computation of
adjusted profit/loss together with his
income tax return. For revenue of
$500,000 or more, he also needs to
submit the Statement of Accounts
certified by him as true and correct.
Max 7 m

Question 2 (23 marks)

For YA 2015, Park Sing Gee will be taxed as a resident.
No. of Days
20 to 30 March
30 March to 10 April
22 April to 15 May
12 July to 2 September
29 September to 19 October
No. of days away from Singapore

10 (exclude 20 Mar)
10 (exclude 30 Mar & 10 Apr)
22
51
19
112

Taxable benefit for provision of car with petrol

= [184/365 x 3/7 x [$220,000 (80% x $40,000) / 10] + [$0.55 x (2,400+1,500)]
= $4,061 + $2,145
= $6,206

Park Sing Gee

Singapore Income Tax Computation
Year of Assessment 2015

Salary ($9,600 x 10)

Bonus
Entertainment allowance ($600 x 10)
Home leave passage (6 x $580 x 20%) + (2 x $580)
Proportionate income derived from Singapore
(306 112) / 306 x $127,856
Hotel accommodation
Housing accommodation (245/365 x $54,000)
Furnishings (40% x $36,246)
Utilities
Provision of car with petrol
School fees
Assessable income
Less: Personal reliefs
Chargeable income
Tax on first $160,000
Tax on balance of $609 @ 17%

$
96,000
24,000
6,000
1,856
127,856
81,059
10,200
36,246
14,498
5,400
6,206
18,000
171,609
11,000
160,609
13,950.00
103.53
14,053.53
1,000.00
13,053.53

Less: 50% tax rebate (capped at $1,000)

Net tax payable

23 m

Question 3 (20 marks)

Computation of Adjusted Profit
YA 2014
-------------------------------------------$
Net profit per the accounts

168,640

Less:
Gain on disposal of fixed assets

1,500
167,140

Add:
Donations

1,660

Depreciation

1,200

Legal fees

3,150
173,150

Add: Partners' appropriations

Partners salaries and bonuses

68,900

($2,800+$2,500) x 12 + ($2,800+$2,500)

Partners travelling allowance

2,700

($300 x 9)

Interest on capital

17,250

3% x ($300,000 + $200,000) x 3/12 +

3% x ($300,000 + $300,000) x 9/12

----------262,000
======

Adjusted profit

Adjusted profit for Period 1: 3/12 x $262,000 = $65,500

Adjusted profit for Period 2: 9/12 x $262,000 = $196,500
(6m)

b)
Rubina
$
YA2014
Period1:1Oct2012to31Dec2012
PSR
3
Salaries
8,400
R:$2,800x3mths
A:$2,500x3mths
Interestoncapital
2,250
R:3%x$300,000x3/12
A:3%x$200,000x3/12
DivisibleProfit
27,510
AdjustedProfit
38,160
Donations($160x2.5)

240

Period2:1Jan2013to30Sep2013
PSR
1
Salaries
25,200
R:$2,800x9mths
A:$2,500x9mths
Bonus
2,800
Travellingallowance

A:$300x9mths
Interestoncapital
6,750
R:3%x$300,000x9/12
A:3%x$300,000x9/12
DivisibleProfit
63,650
AdjustedProfit
98,400

Agnes
$

Total
$

2
7,500

15,900

1,500

3,750

18,340
27,340

45,850
65,500

160

400

1
22,500

47,700

2,500
2,700

5,300
2,700

6,750

13,500

63,650
98,100

127,300
196,500

Donations($1,500x2.5)

1,875

1,875

3,750

Capitalallowances

7,200

7,200

14,400

(14m)

10