This document contains suggested solutions to tax deductible expense questions for Topic 3. It addresses expenses for a holding company and subsidiary company. For the holding company, loan write-offs, private car expenses, fines, donations, entrance fees, and formation expenses are not deductible. For the subsidiary company, private car and rental car expenses, issue of share certificates, and general stock provisions are not deductible. Renovation expenses may be deductible over three years under section 14Q of the tax code. Interest income is reported separately and not all amounts are taxable in the current year.
This document contains suggested solutions to tax deductible expense questions for Topic 3. It addresses expenses for a holding company and subsidiary company. For the holding company, loan write-offs, private car expenses, fines, donations, entrance fees, and formation expenses are not deductible. For the subsidiary company, private car and rental car expenses, issue of share certificates, and general stock provisions are not deductible. Renovation expenses may be deductible over three years under section 14Q of the tax code. Interest income is reported separately and not all amounts are taxable in the current year.
Original Title
Suggested Solutions to Homework 3 - Deductible Expenses (2)
This document contains suggested solutions to tax deductible expense questions for Topic 3. It addresses expenses for a holding company and subsidiary company. For the holding company, loan write-offs, private car expenses, fines, donations, entrance fees, and formation expenses are not deductible. For the subsidiary company, private car and rental car expenses, issue of share certificates, and general stock provisions are not deductible. Renovation expenses may be deductible over three years under section 14Q of the tax code. Interest income is reported separately and not all amounts are taxable in the current year.
This document contains suggested solutions to tax deductible expense questions for Topic 3. It addresses expenses for a holding company and subsidiary company. For the holding company, loan write-offs, private car expenses, fines, donations, entrance fees, and formation expenses are not deductible. For the subsidiary company, private car and rental car expenses, issue of share certificates, and general stock provisions are not deductible. Renovation expenses may be deductible over three years under section 14Q of the tax code. Interest income is reported separately and not all amounts are taxable in the current year.
Suggested Solutions to Topic 3 – Deductible Expenses
Answer 1 (Comprehensive)
Holding company – Year ended 31 Dec 2021
$ (a) Provision for leave pay + 80,000 Loan to ex-employee written off + 18,000 (b) New tenancy agreement + 4,100 (c) Reimbursement of private car expenses + 4,500 (d) Fines + 5,000 (e) Donations + 12,500 (f) Entrance fee to Keppel Country Club + 17,000 Formation expenses + 15,000 (f) Interest income on a loan to a local company - (10,000)
• Provision for leave pay not deductible as this is a general provision.
• Loan to ex-employee written off is a non-trade debt and not deductible. • New tenancy agreement is not deductible because this is a new agreement and hence capital in nature. However, renewal of tenancy agreement will be deductible. • Private car expenses in Singapore is not deductible. • Fines for law violation is not deductible. • Donations are not deductible. However, tax deductions of $12,500 ($5,000 x 2.5) approved cash donations made to National Kidney Foundation on 4 May 2021 of $5,000 can be claimed against statutory income under s37(3). • Entrance fee to Keppel Country Club and formation expenses are capital expenditure. • Interest income is not s10(1)(a) income. Will be separately reported as interest income.
Subsidiary Company – Year ended 31 Dec 2021
$ (a) Renovation of office + 40,000 (b) SKD 947 B + 5,500 Upkeep of rental cars + 9,600 (c) Annual car rental charges + 32,000 (d) Issue of new share certificates + 4,000 (f) Interest income (net) - 26,500 (g) Provision for stock obsolescence + 10,000
• The renovation of office (ceramic flooring, walls, and ceilings) of $40,000 can be claimed as a tax deduction over three years under s 14Q of the ITA, subject to a cap of $300,000 for each relevant three consecutive basis periods. If the expenses pertained to normal repairs and replacement, then the entire amount may be claimed under s 14(1)(c) of the ITA. • Private cars and rented cars expenses are not deductible. • Issue of share certificate is capital expenditure.
1 • Interest income is not s10(1)(a) income. However, only $5,000 received in the financial year ended 31 Dec 2020 will be added to the adjusted trading profits to determine the statutory income to be assessed on an accounting year basis. Fixed deposit maturing on 31 March 2022 ($4,500) will be reported in YA 2023. Interest from an overseas associated company not remitted into Singapore will not be liable to tax ($18,000). • General provision for stock obsolescence is not deductible. However, specific provisions is allowable.
