Taxation Theory, Practice and Law - Assignment sample

Taxation Project

EXECUTIVE SUMMARY
This report mainly summarize about the income tax that is paid by an individual or
business within an accounting year on the total revenue earned from various sources. The entire
report is related with different treatments under section 45I and also summaries Operations of
Section 45 of SITA, Application of provision of section 45 and tax treatments subject to S45,
Exemption from applicability of section 45 and related section, Tax consequences in case of
payment to Austria chef by Delta Enterprise.
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Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Operations of Section 45 of SITA:..............................................................................................3
Application of provision of section 45 and tax treatments subject to S45:.................................4
Consequences of defaulting withholding tax payments:.............................................................5
Exemption from applicability of section 45 and related section:................................................5
Tax consequences in case of payment to Austria chef by Delta Enterprise:...............................6
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................8
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INTRODUCTION
Taxation is a term used by government authority to levy or impose of a tax. For this,
various the very important laws that provide boost to its economy by providing various ways to
raise the funds by apply various tax rates related to direct income of general public (Hayo and
Uhl, 2015). Generally, direct income of an individual includes only that income of an individual
which is borne and paid by the same individual. This report dived into various tasks which is to
be answered as per Singapore Income Tax Act (SITA) and a practical problem is given which
shall be answered according the provisions of SITA.
TASK 1
Operations of Section 45 of SITA:
Operations as given in the section 45 of Singapore Income Tax Act (SITA) are as
follows:
1. A person which is liable to pay an amount as an interest payment to any other person
(resident of Singapore country), then in such case, the person paying the interest at the
time of paying such interest shall be liable to -
(a) Deduct tax -
(I) At the rate of 22%, where person to whom payment is given is individual
or a Hindu joint family (HUF).
(II)At the rate 17%, where person to whom payment is given is any other
person (i.e. other than individual or HUF ).
(III) In case, where provision of section 43(3) or (3A) is applicable to person to
to whom interest amount is paid, at the as provided in that provision.
(b) Shall give notice of the deduction of tax and pay to the comptroller the amount so
deducted (Biørn, 2017).
NOTE: In such a case, such amount of tax deduction shall be treated as a debt due from such
person to the government and shall be recoverable in the manner provided by section 89. As per
sub section (1A) of this section, notwithstanding subsection (1), rate of deduction of tax shall be
18% on every payment (other than payment falls under section 43(3) or subsection 3A) made on
or after 1st January 2009 which comes in assessment year 2009. as per subsection (1B), notice
shall be given by electronic means.
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22 Where a person is fails to deduct such amount as per section 45(1), then such
person shall be required to pay such such amount as such as debt to the Govt.2222 This section shall not apply in case of payment of interest which is derived from
qualifying debt securities (subject to some conditions).
Application of provision of section 45 and tax treatments subject to S45:
The application of provisions of section 45 of S.I.T.A. are given in various other
provisions of this act, some of such provisions are elaborated in following points:
 Such provisions shall be applicable to the royalties, management fees etc. but
subjected to the condition as may be given in section 45A and as may be prescribed by
Govt. to impose some restriction. According to this, any discount from qualifying debt
securities issued during the period from 27th February 2004 to 16th February 2006
which mature within one year from date of issue of securities and also not applicable
to in case of discount from qualifying debt securities issued during the period from
17th February 2006 to 31st December 2023.
 Application of section 45 is also applied to non-resident director's remuneration as per
section 45B. According to this payment of remuneration of directors of company who
is not resident of Singapore as provided in section 45, any reference in those
provisions to interest shall be construed as a reference to such remuneration.
 Provision of section 45 shall also be applied to unit trust subject to the condition as
given in section 45C but section 45C shall not apply in case of any distribution which
is made on or after 28th February 1998 by a designated unit trust referred to in section
32(12) (Kennedy, 2018).
 Application of provisions of section 45 shall also be applied to gains from real
property transactions subject to provisions of section 45D.
 Section 45 of SITA is also applied to withdrawals by non-citizen SRS members, etc
subject to provisions of section 45E. According to this, where all the funds standing in
the SRS account of an SRS member is made on the ground in section 10L(3G),
section 45 applies only in relation to an amount determined in the following manner:
A/A+B*C
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where A = Amount of funds withdrawn from the SRS account on that
ground;
B = Total value of investment that is deducted from balance in SRS
amount;
C = Amount of the SRS member’s income chargeable to tax under
section 10(1)(g) as determined under section 10L(3G)
Consequences of defaulting withholding tax payments:
There are some consequences as give in section 45 in case of defaulting of these
provision, which are as follows:
 If the amount is not paid by the individual to Govt. up-to 15 days of second month
following the month in which the tax amount is deducted, then individual shall be liable
to pay 5% of such tax as a penalty (Sandford, 2018).
 If individual is also not paid within 30 days after time specified in above point then
additional amount of penalty as 1% shall be payable for each completed month.
 If such individual is not able to furnish notice of such deduction to comptroller then he
shall be guilty of offence and a penalty equal to 3 times of amount of tax should be levied
but which can not exceed $10000 or to imprisonment for a term not exceeding 3 years or
both.
Exemption from applicability of section 45 and related section:
Though provisions of this section of SITA is applicable in respect of each transactions
but there some exemptions given in the Act which are as follows:
(1) In section 45I for sub part 1 to 8 and 45A shall not be applicable to any income that has been
referred in section 12 that is liable to be given into the subsection, such as
a) In the period from 17th Feb 2012 up-to 31st march 2021 which includes following
exemption such as:
 Contract that happen before 17th Feb 2012
 contract that is extended or renewed
 Debt Security that was published before 17th Feb 2012
b) Contract that took effect same date of specific period.
c) contract that are renewal or extended with particular time.
d) Debt Security that was issued on same date.
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(2) Subsection are applied on the respective person:
a) bank that get licensed within the banking Act or Monetary Authority of Singapore Act.
b) Financial institution that are licensed with Finance company Act
c) an individual that have:
▪ Contain a capital service and have licence under Securities and Futures
Act
▪ Person included in compose of debt and other equity
▪ Got approval before 17th Feb 2012 for Income Tax.
3) In case if the total payment is intended to be done by:
(i) On any day after the approval period that is 31st march 2021 that includes
(a) Any contract that have taken place before approval date
(b) Any contract that was renewed and extended before 31st march 2021
(c) Debt security that published on approval date (Schmalbeck, Zelenak and
Lawsky, 2015).
(ii) All those contract that took effect on a specific date which are part of approval period
(iii) With a debt security that was issued on a particular date that are part of period before
approval date.
(4) According to subsection (3) (c), consent by the Minister or individual appointed by him shall
be subject to such requirements as may be imposed by the Minister or individual.
(5) In section there shall not extend to any revenue payment referred to in section 12(6) that the
inspector is satisfied with in relation with an compatibility for which the aim or impact is one
mention in section 33.
Tax consequences in case of payment to Austria chef by Delta Enterprise:
As per the section 45A related to payment of royalty fees read with section 45(1A), delta
enterprises are liable to deduct tax at the rate of 18% before paying money to the Austria chef.
Delta enterprise also required to pay the such amount to the Govt. and also require to furnish a
notice regarding this to the Comptroller.
CONCLUSION
From the above report it is concluded that for giving payment of any interest payment
and other related payment which will earned by a person in territory of Singapore then deduction
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of tax is mandatory and payer should required to to deduct tax as per Singapore Income Tax
Rate. There are some situations which also be considered where there is no requirement of
withholding taxes as given in section 45I.
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REFERENCES
Books and Journals:
Biørn, E. (2017). Taxation, technology, and the user cost of capital (Vol. 182). Elsevier.
Hayo, B., & Uhl, M. (2015). Taxation and labour supply: Evidence from a representative
population survey. Journal of Macroeconomics, 45, 336-346.
Kennedy, W. (2018). English Taxation, 1640-1799: An Essay on Policy and Opinion. Routledge.
Sandford, C. T. (2018). Taxing Personal Wealth: An Analysis of Capital Taxation in the United
Kingdom—History, Present Structure and Future Possibilities. Routledge.
Schmalbeck, R., Zelenak, L., & Lawsky, S. B. (2015). Federal Income Taxation. Wolters
Kluwer Law & Business.
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