filing company tax and pic claims: intermediate
DESCRIPTION
This is an intermediate session for directors and shareholders who would like to understand Singapore tax principles in a more in depth manner, including an introduction to tax planning basics and optimizing PIC claims. (Plug-in@Blk71, November 13.) Here are some of the topics we've covered: - Directors fees vs. Dividends; - Development costs of software, website as assets instead of expenses; - Productivity & Innovation Credit: 60% cash payout vs. 400% tax deduction; - Private car expenses; - Medical care expenses, - Depreciation – what period to choose? Best practices; - When to recognize revenue for long term contracts, SAAS offerings. Read more: http://futurebooks.com/blog/filing-company-tax-pic-claims/?preview=true&preview_id=14454&preview_nonce=e66a1b20f5TRANSCRIPT
Prepared for Plug-In@Blk71
As of November 2014
FILING COMPANY TAX
AND PIC CLAIMS:
INTERMEDIATE
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LAUNCH YOUR BIG IDEA
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Tax planning basics - from a company formation stage
PIC: 60% cash payout vs. 400% tax deduction
Income tax computation from annual financial statements
WHAT WE WILL COVER
TAX PLANNINGBASICS:COMPANY FORMATION
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DIRECTORS’
REMUNERATION
VS. DIVIDENDS
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Directors’ remuneration
Dividends
Revenue 1,000,000 1,000,000
Less: General expenses 450,000 450,000
Less: Directors' remuneration 250,000 -
Net Profit 300,000 550,000
Tax Exemption (Start-ups) (200,000) (200,000)
Profit after exemption 100,000 350,000
Tax @ 17% 17,000 59,500
Profit after tax 83,000 290,500
Personal tax @ 18% 29,750 -
DIRECTORS’ REMUNERATION VS. DIVIDENDS
A majority shareholder and director of the company is making a decision on
whether to receive money by way of a remuneration or dividends.
TAX PLANNING BASICS:TAX FILING
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RECOGNIZING
REVENUE ON LONG-
TERM CONTRACTS
PIC CLAIMSOPTIMIZATION
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PRODUCTIVITY &INNOVATION SCHEME
PIC CASH
BACKPIC TAX
ALLOWANCE
PIC BONUS
PIC +
• Up to S$ 100,000 in 6
qualifying activities
• 3 local employees
• Active business operations
Year of Assessment 2013-15
• Cash bonus up to S$ 15,000
• 3 local employees
• Active business operations
• Minimum S$ 5,000
• 400% tax deductions
• S$ 400,000 / activity / year
• Claim directly in the income
tax return
Year of Assessment 2015-18
• Up to S$ 600,000 on six
qualifying activities instead
of S$ 400,000
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PIC SCHEME:OPTIMIZATION
Profit?
Cashflow?
Tax
deduction or
cashback?
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ABC Pte Ltd has net profits of 1 million dollars.
Two servers worth of 50,000 dollars each were purchased during its financial year.
The company is still enjoying startup partial tax exemption.
PIC SCHEME:SCENARIO
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PIC SCHEME:OPTIMIZATION
60% cash payout 400% tax deduction
Net profit 1,000,000 1,000,000
Server expenses 100,000 (100,000)
Less: 300% enhanced deduction
0 (300,000)
Profit before tax 1,100,000 600,000
Less: Partial tax exemption
(152,500) (152,500)
Net profit before tax 947,500 447,500
Tax @ 17% 161,075 76,075
INCOME TAX COMPUTATION
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INCOME TAX COMPUTATION
Requested by the Inland Revenue Authority of Singapore (IRAS) in addition to Form C / C-S
Referred to by stakeholders, e.g. investors, accountants and auditors, in the future years during due diligence
Starting point is Profit and Loss statement
P&L
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INCOME TAX FILING
Estimated Chargeable Income (ECI) filing –3 months from financial year end
Corporate tax filing (Form C / C-S) –ensuing 30 November
Extended deadline for online filing –ensuing 15 December
TAX PLANNING:ADDITIONAL TIPS
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FOREIGN
BUSINESS TRIPDOUBLE TAX DEDUCTION
FOR INTERNATIONALISATION
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FOREIGN SOURCED
INCOMETERRITORIAL SYSTEM OF TAXATION
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DOUBLE TAXATION
TREATIESFOR RESIDENT COMPANIES:
DTAA WITH 76 COUNTRIES
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WESTMINISTER PRINCIPLE (1936)
“Every man is entitled, if he can, to order his affairs so as that the tax attaching under the appropriate acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the commissioners of inland revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”
Duke of Westminster’s case (1936) AC 1, Lord Tomlin.
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SECTION 33 OF THE
INCOME TAX ACTANTI-AVOIDANCE PROVISION
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TERMS OF USE
Restrictions on use of contents
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