ACC307: Taxation of Companies in Singapore (under IRAS)
1. Which of the following would likely constitute revenue receipt(s) for a manufacturing company?
a. Proceeds from the sale of machine used for manufacturing.
b. Proceeds from the sale of a business.
c. Proceeds from the sale of shares in a subsidiary.
d. Rental received from the letting of an investment property.
2. The factor of __________ would not be used in assessing whether a foreign company is trading in or with Singapore.
a. existence of a subsidiary in Singapore.
b. securing and concluding of sales contract in Singapore.
c. transfer of title of goods in Singapore.
d. existence of a permanent establishment in Singapore.
3. Which of the following is true about “subject to tax” condition to enjoy tax exemption under S13(8) of the Income Tax Act?
a. Both withholding tax and underlying tax must be suffered to satisfy the condition.
b. The condition could be treated as being satisfied if the foreign country grants a tax exemption due to substantive activities being conducted in the foreign country, which leads to no tax suffered in the foreign country.
c. Both withholding tax and underlying tax must be suffered to satisfy the condition and both must be at least 15%.
d. Either withholding tax or underlying tax must be suffered but it must be at least 15%.
4. Princeton Pte Ltd carries on a business of selling kids apparel. In financial year 2017, it carried out its first renovation project on its chain of retail outlets since its incorporation. It incurred $60,000 S14Q qualifying expenses on the renovation project and such expenses were expensed off in the Profit and Loss account.
With regards to the renovation expenses, the tax adjustment(s) to arrive at the adjusted trading profits for Year of Assessment 2018 is(are):
a. Subtract $60,000.
b. Subtract $20,000.
c. Add back $60,000; Subtract $20,000.
d. Add back $20,000; Subtract $60,000.
5. ABC Pte Ltd is in the business of manufacturing shoes. It sold a property along Cuscaden Road. The property was held for a period of 20 years and this was the first property sale transaction by the company since its date of incorporation. The proceeds from the sale will be used for the expansion of the company’s business. Based on the information provided, which of the following badges of trade may not be relevant in determining whether ABC Pte Ltd is trading in properties?
a. Circumstances responsible for realization.
b. Supplementary works done.
c. Frequency.
d. Period of ownership.
6. Petra Pte Ltd made a cash donation of $1,000 to Singapore Red Cross for the purpose of helping the victims of a natural disaster that occurred in Country A. The cash donation if allowed as approved donation, would qualify for a 250% deduction. The tax adjustment(s) required for the relevant year of assessment is(are):
a. No adjustment required.
b. Subtract $2,500.
c. Add back $1,000; Subtract $2,500.
d. Add back $1,000.
7. In applying the six badges of trade to assess whether a taxpayer is trading, we should take note that:
a. No one badge is conclusive on its own.
b. The term “trade” is already defined in the Income Tax Act and the application of the six badges of trade is to confirm the existence of trade.
c. All six badges are relevant in a scenario.
d. No other factor other than the six badges of trade would be relevant in a scenario.
8. Jays Pte Ltd received in its Singapore bank account foreign income which included foreign rental income and foreign dividend income from Country A as well as foreign interest income from Country B. All foreign income were subject to tax in the foreign countries and the headline tax rates of Country A and Country B are 22% and 20% respectively. __________ would be treated as exempt income under S13(8) of the Income Tax Act.
a. Foreign interest income and foreign rental income.
b. Foreign dividend income.
c. Foreign rental income and foreign dividend income.
d. All foreign income.
9. Which of the following expense is a capital expense incurred by a manufacturing company?
a. Accounting fees.
b. Purchase of factory building used for manufacturing operations.
c. Interest on a loan used to acquire machinery used for manufacturing.
d. Staff remuneration.
10. ABC Pte Ltd made a cash donation of $5,000 to National Kidney Foundation to help dialysis patients in Singapore. The cash donation if allowed as approved donation, would qualify for a 250% deduction. The tax adjustment(s) required for the relevant year of assessment is(are):
a. Add back $5,000.
b. Add back $5,000; Subtract $12,500.
c. No adjustment required.
d. Subtract $12,500.
11. Which of the following statements is incorrect?
a. Receipts arising from a substantial restriction of one’s activities are likely capital receipts.
b. What is circulating capital to a business may be treated as fixed capital for another business.
c. Damages received for the cancellation of a trading contract which constitute 10% of the taxpayer’s income are capital receipts.
d. Revenue receipts are usually receipts of a recurrent nature.
12. Propex Pte Ltd is a manufacturing company. It incurred interest expense on a loan used to acquire an office unit which was rented to derive rental income. For income tax purposes, the interest expense is:
a. Deductible against the rental income of the company.
b. Deductible against the adjusted trading profits of the company.
c. Proportionately deductible against the adjusted trading profits and rental income of the company.
d. Not deductible.
13. Maison Pte Ltd carries on a business of selling kids apparel. In financial year 2017, it carried out its first renovation project on its chain of retail outlets since its incorporation. It incurred $360,000 S14Q qualifying expenses on the renovation project and such expenses were capitalised as assets in the Statement of Financial Position.
With regards to the renovation expenses, the tax adjustment(s) to arrive at the adjusted trading profits for Year of Assessment 2018 is(are):
a. Add back $360,000; Subtract $120,000.
b. Subtract $120,000.
c. Add back $360,000; Subtract $100,000.
d. Subtract $100,000.
14. Jays Pte Ltd was incorporated on 1 July 2017 and carries on the business of selling second hand goods. It closed its first financial period on 31 December 2017 and adopts a financial year end of 31 December. It made its first purchase of second hand goods on 1 April 2018 and its first sale on 1 July 2018.
For the purpose of S14U of the Income Tax Act, __________ would be treated as the deemed date of commencement of business for the company.
a. 1 April 2018.
b. 1 January 2018.
c. 1 July 2017.
d. 1 July 2018.
15. Which of the following exchange difference would not require a tax adjustment to arrive at the adjusted trading profits for income tax purposes?
a. Exchange loss from the translation of foreign investment denominated in US$.
b. Exchange gain from the settlement of trade receivable.
c. Exchange gain from the purchase of a machine used for manufacturing.
d. Exchange loss from the purchase of share investment.
16. Which of the following would be treated as non-trade income?
a. Interest charged on its trade receivables by a trading company.
b. Rental income received by a company which is in the business of letting properties.
c. Interest income on loans granted by a bank.
d. Dividend income on share investments owned by a manufacturing company.
17. Which of the following are condition(s) to be satisfied for an expense to be accorded a tax deduction for Singapore income tax purposes?
I. The expense is revenue in nature.
II. The expense must be wholly and exclusively incurred in the production of income.
III. The expense must be paid.
IV. The expense must not be prohibited under Section 15 of the Income Tax Act.
a. I, II and III.
b. I, II, III and IV.
c. I, II and IV.
d. I and IV.
18. Under the territorial system of taxation, __________, is treated as foreign income received in Singapore.
a. foreign dividend income which was used to purchase office equipment that was put into use by an overseas trading office.
b. trading income from Singapore operations.
c. rental income from an overseas property which was used to settle an outstanding trade payable.
d. interest income from an offshore bank account which was used to purchase share investments in a foreign company.
19. Allan Pte Ltd participated in an overseas trade fair and incurred travelling and accommodation expenses of $12,000 (4 employees), rental of booth of $15,000 and marketing brochures of $1,000. The approved number of employees for further deduction under S14B of the Income Tax Act is 2 and the said expenses were expensed off in the Profit and Loss account. The amount of further deduction under S14B of the Income Tax Act and tax adjustment for the relevant year of assessment are:
a. $22,000; Subtract $22,000.
b. $28,000; Subtract $56,000.
c. $28,000; Subtract $28,000.
d. $22,000; Subtract $44,000.
20. Which of the following are condition(s) to be satisfied for an expense to be accorded a tax deduction for Singapore income tax purposes?
I. The expense is revenue in nature.
II. The expense must be wholly and exclusively incurred in the production of income.
III. The expense must be paid.
IV. The expense must not be prohibited under Section 15 of the Income Tax Act.
a. I and IV.
b. I, II and III.
c. I, II and IV.
d. I, II, III and IV.
