AC2301 Exam Practice Review

Tax Computation (See if GST registered co)

 If Dividend don’t qualify for FSIE because headline tax<15%, it can still qualify for FTC
source by source basis because of the foreign tax suffered.
 Warehouse bought in 2012  IBA phased out. No mention of EDB approval for LIA  No
balancing adjustment
 S24 Balancing Adjustment: Consider PPE (not applicable for industrial building)

Shortcut:
 Repair and maintenance work at residential property owned by co ≠ business premise  not
s14N; ND
 GST on replacement cost of perimeter fencing  Input GST recoverable from IRAS, thus
expense on P/L non-deductible
 Loan to fund working capital  produces trade income  deductible against trade profit
 Advance given to Co’s employee written off after the staff passed away unexpectedly 
Loan to employee  Not a trade debt; Treat like a loan to employee, capital in nature  Not
Deductible
 Interest exp capitalised on Balance Sheet on loan to finance construction of building with
LIA: Building still in construction = no income thus the interest exp did not produce income
 ND. But if the business is in use = income producing, then deduct the interest expense
from Trade profit
 Blocked Input GST: Not recoverable from IRAS
If underlying exp Ded, input tax Ded
e.g. Annual club fee- Ded, thus Input tax Ded in trade profit computation
S-plate- ND, thus input tax ND in trade profit computation
 Input GST on purchase of P&M: GST not recoverable from IRAS and not deductible from
trade profit becoz can claim CA
 QD of CA must include Purchase taxes and import/custom duties
 Output GST ignore
 Forex loss on acquiring P&M  Include in CA
E.g. Machine 365,000
Forex Loss 6,000
Expense incurred on strengthening of floors of warehouse to mount machine: 7,000 (don’t
include in LIA)
QD of CA = 365,000+6,000+7,000
 Forex gain on acquiring P&M  Excluded in CA
 If not eligible for s14(c)/s14N, do normal CA. e.g. Demountable/Movable workstation
partitions
 trademark can be any word, phrase, symbol, design, or a combination of these things that
identifies your goods or services
 Patent is an exclusive right granted for an invention
AC2301 Exam Practice Review

Income vs Capital
PMA Test:

Income He decides to turn the know-how into profit by ‘selling it like a commodity’ through
licensing arrangements = trading in know-how. Even if terminated, it won’t affect
NR’s business as he does not operate in SG market
Capital

BOT Test:
Purported motive ≠ Real Motive
He took steps to demonstrate this motive (Give evidence e.g. document as Investment Property)
Change in motive due to unexpected circumstances:
It could be said that there had been a change of intention with respect to the 5 units at the time the
second loan was taken to complete the construction, and that these 5 units therefore became revenue
assets from that point onwards. That would make the gain taxable, but the gain would be quantified
based on the cost price prevailing as at the date of the change of intention.
AC2301 Exam Practice Review

Tax Residency
Qn: NR
Step 1:
Qualitative test: Not satisfied because …(Evidence: Permanent home in US)
Quantitative test: Physical presence x days < or >183 days
Employment Period x days < or >183 days
Conclusion: NR/R for the YA2022.
However,
2/3 year concession: employment staddles a continuous period of at least 2/3 calendar years.

If 2 years e.g. YA2022 & YA2023 : As NR, eligible for s13(6) exemption for YA2022 where
employment period x<60 days regarded as short-term employment.
Should choose to be NR in YA2022 so that his employment income will be exempt for SG income
tax.
If 3 years e.g. Not eligible for s13(6) exemption for YA2022. Even though Singapore employment in
2020 did not exceed 60 days, the entire employment period straddles at least three calendar years and
therefore cannot be considered a short-term visiting employment.
Therefore, as a NR, employment income will be subject to tax, with s40B relief allowed. Since s40B
results in a tax liability that is the higher of 15% of the employment income and tax on the
employment income on a resident basis, being a NR cannot possibly result in a lower tax liability on
the employment income than as a resident.
As a NR, Austin’s business income will be taxed at a relatively high flat tax rate of 22%.
Conclusion: Hence, Austin should opt to be treated as a resident so that he can claim personal reliefs
and be subjected to the progressive tax rates on his chargeable income.

 If Resident for YA2021, Still needa ascertain if R/NR YA2022 (may get s13(6) exemption)
If originally resident, see below:
AC2301 Exam Practice Review

Resident

Statutory Income Computation Individual

$ $

Salary (reward for employment services) 45,000

Cash allowance 15,000

Less: Housing (not deductible; private expense) (0)

*there was no housing benefit as it was between
employee and landlord; co did not rent it for
him

Entertainment (deductible; to discharge duties (3,000)

of employment)

Car rental (to discharge duties of employment, (0)

but deduction prohibited under s15(1)(k) ITA)

12,000

Interest subsidy (concession not applicable since Austin 150

is a director and has the ability to control/influence
BPT, and the loan was not granted under a scheme
available to all staff)
AC2301 Exam Practice Review

Waiver of loan (effectively, a discretionary bonus 50,000

declared payable on 15.2.2020 to reward for past
employment services)

Employment income 107,150

If have Car benefit e.g. Co buy/rent car for employee  Don’t treat the employee’s allowance for car
expenses as actual running and maintenance cost for co. Treat it separately
Gains from ESOP plan = Open market price of shares on the date of exercise less any price paid for
the shares (exercise price)
GST
Considerations before registering for GST voluntarily:
1. Additional admin costs
2. Whether biz’s suppliers are GST-registered, otherwise no input GST to claim
3. Whether biz’s customers are GST-registered, if they are then these customers will be able to
claim their input GST, but if they are not, the increased price could cost the business its
customers
4. Type of sales the business makes; if they make zero-rated supplies they will benefit more
from the GST registration as they are more likely to be in a net refund position
5. Pricing of goods and services after GST registration; whether biz will pass on the cost of GST
or absorb GST
6. Whether the business is prepared to stay registered for at least 2 years

Output and input GST Implications OOS EX T-SR T-ZR

Is 7% output tax chargeable on the supply? N N Y N

Is Input tax on inputs used in making the supply N* N* Y** Y**

recoverable as input tax credit

*Some exceptions apply | **Provided that other relevant conditions are met
If blocked, no deemed supply-> No output GST

Input tax related to exempt tax not recoverable from IRAS

AC2301 Exam Practice Review
For exam: Say “meets the conditions for claiming input tax and is not blocked by Regulations 26 and
27”
Keywords:
B2C Digitised form/digital services imported by
non-GST registered persons (individual/biz)
B2B (e.g. wholesalers & retailers) Services
imported by GST-reg persons
Employee’s family benefits
/medical exp(except injury compensation& pre-
employment assessment)/accident insurance
premium/recreational club fee/S-plate expenses
Third country sale (e.g.SG co has warehouse in
Malaysia which delivers to Japan customers)
International services
E.g.
1.SG co handle media and regulatory req on
behalf  5% admin fee to CHK (foreign)
[output GST]
Free gift (goods) to employee less than $200
Free gift (goods) to employee more than $200
Free service to client
GST on payment to trade association on
entrance &subscription fee
Unfurnished apartment
Furnished apartment
Consider
Overseas vendor Registration:
1.annual global turnover>1mil on taxable
supplies &
2.makes B2C supplies of dig svc to non-GST
reg cust in SG >$100k
Conclusion: Reg under OVR and acc for output
GST on supplies of dig svc to non-GST reg cust
in SG
Reverse charge
GST reg partial exempt trader (
you make both taxable supplies and exempt
supplies)
Or
Non-gst registered trader
1.Total imported services for 12 months exceeds
$1 million &
2. Not entitled to full input tax recovery if he
were GST-registered (e.g. partial exempt trader)
Conclusion: Reg under RC regime and acc for
output GST on both taxable supples and imp svc
from overseas
Blocked Input GST
Not recoverable from IRAS
If underlying exp Ded, input tax Ded
e.g. Annual club fee- Ded, thus Input tax Ded in
trade profit computation
S-plate- ND, thus input tax ND in trade profit
computation
OOS
Zero rated
0% GST
Can claim input GST
Not deemed supply  No need deemed output
GST
Can claim input GST
Deemed supply  Deemed output GST
Not deemed supply  No need deemed output
GST
Not Blocked Input GST becoz trade related club
Thus, recoverable from IRAS. Not deductible
from Trade profit
Unfurnished residential property – Exempt
supply
must charge GST on the supply of movable
furniture and fittings only
Rest is exempted (fixtures such as built-in
AC2301 Exam Practice Review

cabinets and wardrobes, kitchen and sanitary

wares, wall-mounted air conditioners that are
attached permanently to the residential property)
1.Purchase from GST registered supplier 1.Standard rated input GST (meet conditions)
2.Sold to local customer and delivered to 2.Zero rated (0%)
Vietnam warehouse
Import goods $400,000 (400,000+5,000)*7% = 28350
Customs duty: $5000 payable *include customs duty
Recovery of expenses Acting as agent: Disbursement (Not supply, No
GST)
Acting as principal supplying G&S for another
party (except for EXEMPT supply):
Reimbursement (Taxable Supply, have GST)

UCA/UTL/UD
Order of Set off of CA/UCA( to arrive at SI): 1. Trade Income 2. Non-trade income
Order of Set off of TL/UTL(against SI): 1. Trade income (After CA) 2. Non-trade income (after CA)
Order of Set of Approved Donations/UD (against SI after trade losses)

Mattel Co:
Adjusted Trade Profit/(Loss): (320,000)
Capital Allowances: 200,000
Non-trade income 240,000

Thus,
1.Set off CA against non-trade =
Non-trade income 240,000
Capital Allowances (200,000)
Balance Non-Trade income 40,000

2. Set of UTL against non-trade =

Non-trade income 40,000
Adjusted Trade Loss (320,000)
UTL 280,000

50% Ultimate Shareholdings Test

Choose 2 relevant dates
If common shareholdings on both dates >50%  Can do c/f c/b
If there is a substantial change in common shareholdings on both dates <50%  Cannot do c/f or c/b

Group Relief (Trf lower of Claimant’s AI or QD(=UTL+UCA+UD of transferor)

AC2301 Exam Practice Review

Conditions
1.Transferor and claimant must be SG incorporated companies
2. Members of the same group (75% ordinary shareholdings test):
Holding co C (3rd SG co)  >=75% direct/indirect in A
 >=75% direct/indirect in B
OR
B co  >=75% direct/ indirect in A
3.Same accounting year end
4.Both elect GR

IF GR and CBR available, give priority to GR.

Qualifying Deduction (QD) = UTL 150k, UD 20k
Claimant Chargeable income (before partial deduction) = 1,000,000
Cannot Claim GR UTL then do CBR for UD. Must transfer the whole QD as much as possible.
If not elect CB only. If more than 100k, the leftover will be forfeited  Unfavourable, don’t
recommend

FTC (see if have adjusted trade profit, if have include in computation)

 For FTC pooling/FSIE: Headline Tax >=15%Single corp rate: 12% in 2021 when the FSI was
received vs Actual tax suffered: 15% in 2020
What is the headline tax applicable for FTC pooling/FSIE: 12% becoz consider year the FSI
is received (may not be actual)
But for Calculations of FTC source by source basis(since not qualified for pooling) use
ACTUAL FT Rate to compute Actual FTC suffered
 One-tier Dividend = only UT but tax incentive so no UT  Gross Dividend income = net
dividend income (if have treaty and it allows for tax sparring, do Tax Sparring Relief; if not
not FTC becoz no foreign tax was suffered)
 You can FTC source by source basis even though headline tax <=15% but there must be a
foreign tax suffered
 Tax Sparing Relief is only available for country that has treaty with SG and the treaty must
allow for it.
 Full Imputation: SH tax = corp tax
 Foreign Dividend Income with UT (have Treaty: see if covered no treaty: >=25%
shareholdings)

WHT Obligations
 AC2301 Exam Practice Review

Step 1: Is it a payment to NR?

Yes No

Step 2: Is it s12(6)/s12(7) deemed sourced in SG? Conclusion:

1.Payment to SG Branch WHT

No Yes exemption applies since SG branch will file
tax returns to IRAS

Step 3: Does NR country 2.Payment to SG Co  No WHT

Non- s12(6)/(7): Trading With/ Trading In
SG has a treaty with SG? obligations

1.Apply S12(1) ITA/treaty definition of PE

No Yes
Trading with – no tax exposure in SG

Trading in – SSI; taxable Step 4(a): Apply Step 4(b):Does treaty specific article
Final/Non-final rate from cover payment (e.g. Interest,
s12(6)/(7) payment to NR
table royalty)?
1.Exception for borne by condition applies e.g. Rental of
– payment related to biz situated outside of movable property -
Yes Right to use
SG through PE outside of SG OR s12(6) No scientific/industrial
payment related to immovable property e.g. Rental of movable property equipment
situated outside of SG

2.Exclusion applies for fee(Excluding Step 5(a): Look at Business Step 5(b): Apply
Interest) related to loan/ Profit Article. Is the payment respective reduced WHT
show-how/management fee: service to NR attributable to NR’s PE rate from treaty
performed outside of SG not given in in SG?
course of biz carried in SG by NR and not
attributable to any PE in SG of NR No Yes
3. Special Exclusion: guarantee fee related
Conclusion: Not taxable in SG Conclusion: Taxable in SG, apply
to loan – service performed in SG not given
in course of biz carried in SG by NR and final/non-final rate from table
not attributable to any PE in SG of NR

Rental of movable property (covered in treaty): If Payment is net of SG tax: 30,000

And e.g. 17% non-final applies
Gross = 30000/0/83 = 36,145
Payable to IRAS = 6,145

Rental of movable property (not covered in treaty):