1. Corporate Income Tax, and GST

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Questions and Answers

What factors are typically examined to determine whether a trading gain arises for taxation purposes?

Amount of capital invested

Badges of trade (correct)

Types of industry and market conditions

Duration of ownership

Which of the following is NOT a criterion for foreign-sourced income to be taxable in Singapore?

Used to purchase property abroad (correct)

Applied towards satisfaction of a trade debt in Singapore

Brought into Singapore

Remitted into a Singapore bank account

How is Singapore-sourced income generally defined?

Determined by the amount received

Taxed only upon distribution to shareholders

Charged to tax regardless of receipt (correct)

Based on where the income is generated

Under section 10(25) of the ITA, foreign-sourced income in Singapore includes which of the following situations?

Income received in cash transferred from abroad Signup and view all the answers

Which aspect is NOT included in the general deduction formula under Section 14(1) of the ITA?

Capital expenditures Signup and view all the answers

What is the corporate income tax rate in Singapore?

17% Signup and view all the answers

When is corporate income tax assessed in Singapore for income earned in financial year 2023?

2024 Signup and view all the answers

Which of the following is NOT considered chargeable income under corporate income tax?

Capital gains from asset sales Signup and view all the answers

According to the Income Tax Act 1947, income tax is assessed on which of the following?

Gains from employment and dividends Signup and view all the answers

What term is used to describe a company's taxable income after deductions for tax-allowable expenses?

Chargeable income Signup and view all the answers

Which of the following statements about capital gains in Singapore is true?

There is no capital gains tax in Singapore. Signup and view all the answers

Which of the following income types is explicitly listed as taxable under Section 10(1) of the Income Tax Act?

Remuneration from employment Signup and view all the answers

What is the primary distinction that determines whether a gain is taxed under income tax in Singapore?

Whether it is considered income or capital Signup and view all the answers

Which of the following expenses can be specifically deducted according to the provisions outlined?

Interest on loans for business income Signup and view all the answers

What type of expense is explicitly disallowed for deduction when determining a person's income?

Capital withdrawn from business Signup and view all the answers

Which of the following is NOT a condition for a deduction under section 14(1) of the ITA?

Expenses must be capitalized Signup and view all the answers

Which of the following statements about capital allowances is true?

Capital allowances can be claimed on depreciating assets Signup and view all the answers

Which type of expense would likely NOT qualify as a specific deduction under the outlined provisions?

Cost of a new office building Signup and view all the answers

What does the general deduction formula disallow according to the outlined provisions?

Disbursements not specifically related to income acquisition Signup and view all the answers

Which section of the ITA specifies what types of expenditures may be disallowed as deductions?

Section 15 Signup and view all the answers

Which type of contribution is subject to rules and ceilings according to the specific deductions?

Employer contributions to pension or provident funds Signup and view all the answers

Which of the following statements correctly describes capital allowances under the GSTA?

Section 19A provides capital allowances at an accelerated rate over three years. Signup and view all the answers

What is the current GST rate in Singapore before January 2024?

8% Signup and view all the answers

Under Section 8(1) of the GSTA, which of the following is NOT a requirement for GST to be chargeable?

The supply must be a non-taxable supply. Signup and view all the answers

Which of the following best describes a 'taxable person' under the GSTA?

A person registered under the GSTA or required to register. Signup and view all the answers

What is the threshold for mandatory GST registration based on taxable supplies in Singapore?

SGD 1 million in a calendar year. Signup and view all the answers

According to the GSTA, which of the following conditions must be fulfilled for a supply to be considered taxable?

The supply must occur in the furtherance of a business. Signup and view all the answers

Which section defines the criteria for a supply to be deemed taxable under the GSTA?

Section 8(1). Signup and view all the answers

What does Section 19B of the GSTA pertain to?

Writing-down allowances. Signup and view all the answers

What is the correct threshold for an overseas supplier to register for GST based on global turnover within a calendar year?

SGD 1 million Signup and view all the answers

What action must an overseas supplier take within 30 days after the end of the quarter if they have exceeded the GST registration threshold?

Register for GST Signup and view all the answers

Under what condition does the Reverse Charge regime apply regarding imported services and distantly taxable goods?

When the recipient is not entitled to full input tax credit Signup and view all the answers

When must an overseas supplier register for GST if they anticipate exceeding the threshold in the next 12 months?

Within 30 days from the date of their forecast Signup and view all the answers

In the Reverse Charge scenario, who is required to account for GST on the imported services and distantly taxable goods?

The recipient as if they were the supplier Signup and view all the answers

What happens if a recipient of distantly taxable goods has already paid GST to the supplier?

They need not account for GST on those goods Signup and view all the answers

What is the minimum value of remote services for an overseas supplier to register for GST when selling to non-GST registered customers in Singapore?

SGD 100,000 Signup and view all the answers

Which of the following conditions must a recipient meet to fall under the Reverse Charge regime?

The recipient must be GST-registered or liable to be GST-registered Signup and view all the answers

Study Notes

Corporate Income Tax in Singapore

The Singapore corporate income tax rate is 17% of a company's chargeable income, applicable to both local and foreign companies.
Chargeable income refers to the company's taxable income, calculated after deducting tax-allowable expenses, for a year of assessment (YA).
Singapore uses a preceding year basis for assessing corporate income tax - income earned in a financial year is taxed in the following year.
The year of assessment (YA) is the year in which the company's income is assessed to tax.

Income Tax Charging Provision

Section 10(1) of the Income Tax Act 1947 (ITA) defines the scope of chargeable income.
Income tax is payable on income accruing or derived from Singapore or received in Singapore from outside Singapore, including:
- Gains or profits from trade, business, profession or vocation.
- Gains or profits from employment.
- Dividends, interest, or discounts.
- Pensions, charges, or annuities.
- Rents, royalties, premiums, and other profits arising from property.
- Gains or profits of an income nature not included in the preceding categories.

Income vs Capital

Singapore focuses on income tax, not capital gains tax.
Determining if a gain is income or capital is highly fact-specific, requiring consideration of circumstances like the source of the gain and whether it relates to a taxpayer's trade or business.

Singapore-Sourced Income

Income earned in Singapore is taxable, regardless of receipt.
The location where the taxpayer engaged in activities that earned the income determines whether it is Singapore-sourced.

Foreign-Sourced Income

Foreign-sourced income generally isn't taxable in Singapore, unless it is received or deemed received in Singapore.
Under section 10(25) of the ITA, foreign-sourced income is considered received or deemed received in Singapore if:
- It is remitted, transmitted, or brought into Singapore (e.g., into a Singapore bank account).
- It is applied to satisfy a debt relating to a Singaporean trade or business.
- It is used to purchase movable property brought into Singapore.

Deductible Expenses

Section 14(1) of the ITA allows deductions for expenses incurred for the purpose of generating income, including:
- Interest and loan-related expenses.
- Rent for premises used for income- generating purposes.
- Expenses for repairing and renewing tools and equipment, provided certain conditions are met.
- Bad debts related to business activities.
- Employer contributions to pension or provident funds, subject to certain rules and contributions ceilings.

Non-Deductible Expenses

Section 15(1) of the ITA disallows deduction of certain expenses, including those:
- Not wholly and exclusively incurred in income generation.
- Representing withdrawn capital or capital not employed for income generation.

Capital Allowances

Part 6 of the ITA addresses capital allowances for depreciating assets used in trades, professions, or businesses.
Capital allowances are applicable to plant or machinery, not buildings.
Sections 19 and 19A govern capital allowances for machinery or plant acquired for business purposes.
Section 19A provides for accelerated depreciation allowances on plant or machinery over a three-year period.

Goods and Services Tax (GST)

The current GST rate in Singapore is 8%, increasing to 9% from January 1, 2024.

GST Charging Provision

Section 8(1) of the Goods and Services Tax Act 1993 (GSTA) charges GST on taxable supplies of goods or services made in Singapore.
For GST to apply, several conditions must be met:
- A supply of goods or services must be made.
- The supply must be a taxable supply, not an exempt supply.
- The supply must be made by a registered or required-to-be-registered taxable person.
- The supply must be made in Singapore.
- The supply must be made in the course or furtherance of a business.

Compulsory GST Registration

A taxable person is someone who is registered or required to be registered under the GSTA.
Businesses are required to be GST-registered in Singapore if:
- Their total taxable supply of goods or services exceeded SGD 1 Million in a calendar year (retrospective basis).
- They reasonably expect to exceed SGD 1 Million in the next 12 months (prospective basis).

Overseas Vendor Registration (OVR)

Overseas suppliers are required to register for GST if:
- In a calendar year, their global turnover exceeds SGD 1 Million and the value of remote services and distantly taxable goods sold to non-GST registered customers in Singapore exceeds SGD 100,000 (retrospective basis) and they have to submit the registration within 30 days after the end of the quarter.
- They reasonably expect their global turnover to exceed SGD 1 Million and the value of remote services and distantly taxable goods sold to non-GST registered customers in Singapore to exceed SGD 100,000 in the next 12 months (prospective basis) and they have to submit the registration within 30 days of the forecast.

Reverse Charge Regime

The Reverse Charge regime applies when a supplier based outside Singapore provides imported services and distantly taxable goods to a GST-registered recipient in Singapore.
The recipient is responsible for accounting for GST on the value of the imported services and goods as if they were the supplier.
This applies as long as the recipient isn't receiving goods or services as an individual in their personal capacity and isn't entitled to full input tax credits.
Notably, recipients of distantly taxable goods don't need to account for GST if they have already paid it to the initial supplier.

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Description

This quiz covers the key points of corporate income tax in Singapore, including the tax rate, chargeable income, and the taxation year of assessment. You'll learn about relevant provisions in the Income Tax Act, as well as the types of income subject to taxation. Test your understanding of how Singapore's corporate income tax system operates.