How to Calculate Tax Payable for Year of Assessment 2020 and Utilize Unabsorbed Loss Items for HBPL

Applying relevant exemptions and deduction rules

Required:(a)Applythe relevant exemptions and deduction rules and constructthe tax computation for the Year of Assessment (“YA”) 2020 to calculatethetax payable for HBPL, if any.Where there is no tax payable, please show clearly the unabsorbed loss item from the respective category.Every item of income and expense given must be accounted for in the tax computation.Where no adjustment is required, please insert “0”. In arriving at statutory income, all items of income from the non-trade source must be accounted for.If an item of non-trade income is not taxable, please state reason why –tax exempt, unremitted foreign income, income not earned yet or income taxable in Yearof Assessment XXXX.All related expenses should also be accounted for.If the expense is not deductible, please insert “0”.Show all workings clearly as application marks will be awarded even if the answer is incorrect(b)On the basis that HBPL is likelyto have unabsorbed loss items, please analysehow the company may utilize any unabsorbed loss items arising from Year of Assessment 2020 efficiently.HBPL has the following assessable income for the following Years of Assessment:?YA 2017: $69,000?YA 2018: $86,000?YA 2019: $145,000In your answer, you are to address the following:?The conditions to be satisfied;?Whether the conditions are met or not and how they are met or not;?For shareholdings test, identify the relevant common shareholders and their shareholdings on the relevant comparison dates;?State the amounts that can be utilized in the relevant YA;and ?How any residual unabsorbed loss items may be utilized??HBPL contemplates that the company will continue to incur losses for financial year 2020.

HBPL is contemplating various options to finance the settlement of the remaining purchase price of the newly acquired factory building as well as the costs of upgrades to be made to the building.The factory will be utilized fully for HBPL’s manufacturing business.The Finance Manager is looking at the following financing options:?Debt financing from a Singapore bank;?Proceeds from new share capital injection from shareholder, Floral;?Proceeds from sale of shares in either Aroma and/or Reboot (the current market value of the shares in Aroma and Reboot are S$800,000 and S$1,000,000 respectively.The shares have been held 2012 and they were acquired through initial public offerings using proceeds from share capital injection.HBPL’spercentage shareholdings in both companies is not more than 10%.HBPL does not own other equity investments.);and?Proceeds from the cumulative dividends received from Aroma and Reboot over the years (estimated at S$570,000).The dividends have been leftin an overseas bank account all this while.Analysethe above options and discussthe Singapore Income Tax implications of each of the above options.In your analysis, you should explain the taxability of any receipt derived from that option as well as the deductibility of any expenses that may be incurred under the respective options.You should also provide your recommendations on the most tax effective way of financing the transaction stating the basis of your recommendations.All analysis and recommendations are to be made purely from the Singapore Income Tax perspect