This is an undoubtedly a taxable benefit. The only doubt here is how to compute the quantum of taxable benefit.
Benefit is applicable to employees. Not applicable to directors who are employees too.
What is the Rule?
The taxable value of the accommodation is the lower of:-
- 10% of the gains or profits from employment LESS any rent paid by the employee; OR;
- the annual value of the premises.
Annual value – $38,000
Rent paid by employee – $700 x 12 months = $8,400
Remuneration from employment – $150,000
Which of the following presentation is correct?
- (10% x $150,000) = $15,000 or
The lower amount being $15,000 ==> taxable benefit would be $15,000 less $8,400 = $6,600.
- (10% x $150,000) less $8,400 = $6,600 OR;
Thus the taxable benefit would be $6,600.
Which do you think is the correct presentation though both give you the same answer?
FRS 7 prescribes the principles in preparing cash flow statements.
The standard requires the provision of information about historical changes in cash and cash equivalents of a company by means of a cash flow statement that classifies cash flows during the period by operating, investing and financing activities.
Operating activities are the principal revenue-producing activities of the enterprise. Cash flows from operating activities are disclosed either using the:-
a) direct method (disclosure of major categories of gross cash receipts and payments); or
b) indirect method (profit or loss for the period is adjusted for non cash items (such as depreciation, foreign exchange losses etc.) and income or expense related items related to investing and financing activities to determine the operating cash flows.
Investing activities are those expenditures incurred with an intention to generate future income and cash flows.
Financing activities are those expenditures incurred that result in changes in the size and composition of the contributed equity and borrowings of the entity.
“Do you know the definition of “cash and cash equivalents”? Can you name some examples of cash equivalents?”, ask Edgar.
Source – ICPAS ePublication 22 November 2005 Issue 11/2005
In BT dated June 4, 2008, Wong Sze Teen and Yeo Kai Eng also discusses the implication of GST on donations.
What is the Rule?
Generally, no GST on CASH donations if the amount involved is small and no tangible benefits granted to Donor.
But when Donors are entitled to some form of benefits ie. chance of a lucky draw to win a trip to Timbuktu, technically speaking such donations attract GST.
IRAS Concessionary Exemption is granted to certain benefits if:-
– the benefit is given as part of acknowledging the donation made and;
– the benefit has no resale value.
Thus certain acts by the Recipients, which are technically speaking, benefits to the Donors, are exempted. Eg. Donors could be invited to and honoured at a Gala Dinner held in conjuction to the Charity.
What if your GST-registered business gave a donation in kind?
Donor has to account for output GST on deemed supply except if:-
– less than $200 and;
– is not part of a series of gifts.
In BT today, Wong Sze Teen and Yeo Kai Eng, GST experts from Ernst & Young, wrote an article on the implication of GST on sponsorship, government grants and donation.
I will cover issues on sponsorship and grants first.
Company X gives $1,000,000 to Company Y as sponsorship for a certain event that Company B is organising. Assuming both are GST-registered.
What is the Rule?
IRAS said sponsorship will not attract GST if company X:-
– did it voluntarily without any obligation and;
– did not receive any tangible benefits in return.
Failing which, company Y would have to issue a GST-tax invoice to company X.
For what amount should the invoice be issued on?
Answer – It depends on the market value of the benefits company Y would have to give to company X.
If market value of benefits < $1,000,000 eg. $800,000, company Y would have to issue an invoice for $800,000 inclusive of GST. Thus company Y would have to account for output GST of $52,236.45 to IRAS. Company X could then account for input GST of the same amount.
Firstly, when is a benefit given is considered a benefit given?
Secondly, company Y would have to determine the market value the benefits granted.
Generally and simply said – Attracts no GST to both the Giver and Recipient.