Tax Residence Status, Taxability of Profit, and YA 2024 Tax Computation for Ms. Betty Tan

Part A: Tax Residence Status for YA 2024

Ms Betty Tan, aged 48, is a Singaporean widowed in 2017 with 3 children, aged 10, 8 and 5 years old as of 31 December 2019.  The children are looked after by a foreign maid with a monthly salary and levy of $650 and $60 respectively.  Ms Tan’s mother, a 65-year-old homemaker with no income of her own, lives with Ms Tan and helps to look after her children.  Ms Tan made a cash donation of $800 to the National Kidney Foundation, an approved institution of public character in December 2019.   Both her children and mother are Singaporeans.

Ms Tan received the following employment income and benefits in 2019:  

(i) Monthly salary of $15,000 and contractual bonus of $50,000.  

(ii) Company share option on 20 March 2019 to acquire 5000 shares with an exercise price of $25 per share.  Ms Tan exercised the option on 10 April 2019 and acquired 5000 shares when the share price was $28 per share.  She sold 3000 shares at $30 per share on 18 August 2019 and 2000 shares at $27.50 per share on 30 November 2019.  

(iii) Entertainment allowance of $1,000 per month.

(iv) Travel awards valued at $5,500 per person including Ms Tan’s mother and children in recognition of her excellent performance. 

(v) Car with a cost of $110,000 and a PARF value of $35,000.  The running expenses of $10,000 are paid by the company.  

(vi) Fully furnished accommodation with monthly rent of $5,000.  Ms Tan contributed a total rent of $6,000 in the year 2019, with the rest paid for by the company.

Ms Tan also has the following income from the year 2019:

-Singapore one-tier dividend of $3,500.

-Interest income from Citibank Singapore, an approved bank of $1,500

-Interest income of $500 from a loan to friend.

-Rental income from two properties in Singapore which have been rented out since 2016.  During the year ended 31/12/2019, the income and expenses from the apartment are as follows:

In addition, Ms Tan owns a property in Australia which was rented out.  She remitted the net rental income of $12,500 to Singapore on 31 December 2019.

During her overseas holiday in June 2019, Ms Tan came across some silk scarfs in Thailand which she is convinced Singaporeans will love.  She bought 300 pieces from the supplier.  Upon her return to Singapore, she contracted a designer to design and repack each scarf in a beautiful box.  She sold all the 300 pieces from October to December 2019, making a net profit of $40,000.  Due to the positive response from her customers, she intends to bring in more of these silk scarves in the future. 

Part A 

Advise Ms Tan on her Singapore tax residence status for YA 2020.  Explain the basis of your answer using either the qualitative or quantitative test.  In your answer, please explain the basis of determining an individual’s tax residence status under the respective test used.  If using the qualitative test, give at least two reasons to support that Singapore is the normal place of residence.

Part B 

Using the badges of trade, advise Ms Tan on the taxability of the profit made from the sale of the silk scarves.  In your answer, please explain the applicability of each badge of trade to Ms Tan. 

Part C

Prepare the YA 2020 tax computation for Ms Tan in the suggested format below.  You may make relevant adjustments to the format as required.  Where an item of receipt is not brought to tax (or conversely an item of expense / relief is not claimed for deduction), please insert “0â€Â (zero) in the tax computation and state the reasons – e.g. not taxable as capital in nature or not deductible as capital in nature. Ms Tan would like to maximize any claims in order to achieve an overall lower tax liability.