Copyright Reserved Serial No. Institute of Certified Management Accountants of Sri Lanka. Managerial Level Pilot Paper

Transcription

1 Copyright Reserved Serial No Managerial Level Pilot Paper Instructions to Candidates 1.Time allowed is two (2) hours. 2.Total 100 Marks 3.Answer all questions. 4.Encircle the number of your choice in relation to Multiple Choice Questions. 5.Candidates are allowed to use non-programmable calculators. 6.The answers should be given in English Language. Subject Subject Code Advanced Taxation (CLT/ ML 4) Part I 11) Which of the following is not an objective of taxation a. Collect revenue to the government b. Removal of disparities in income and wealth distribution c. Penalize the wrong doers d. Capital accumulation 12) Which of the following is not a principle of income taxation? a. Tax law should be understandable to a general person b. The basis of tax system should be changed time to time c. Taxes should not harm the tax payer and the sources of income d. Tax should be inexpensive in collection 13) Which of the following is an example for a Progressive Tax; a. Value Added Tax (VAT) 1

2 b. Individual Income tax c. Corporate Income tax d. Stamp duties 14) Select the true statement in the case of individuals a. Income wherever arising is chargeable to tax, if such individual is a non-resident of Sri Lanka. b. Rent received by a non-resident of Sri Lanka from a property outside Sri Lanka is chargeable to tax. c. Income received from services rendered in Sri Lanka by a non-resident is chargeable for tax. d. Employment income received outside Sri Lanka of a resident person is not chargeable for tax 15) UNIMO Global is a multinational company of which the principal office situated in USA and UNIMO SL is the Sri Lankan operational arm of the group which is registered as a private limited company in Sri Lanka. For the year 2015/2016, UNIMO Global has earned a profit of US$ 6 billion and UNIMO SL s contribution was US$ 123 million. Determine the tax implication. a. UNIMO group is liable to pay income taxes to the Sri Lankan government on the profit of US$ 6 billion. b. UNIMO group is not required to pay income taxes to the Sri Lankan government c. UNIMO group is liable to pay income taxes to the Sri Lankan government on the profit of US$ 123 million. d. UNIMO group should pay tax to the Sri Lankan government on total US$ 6,123 million 16) What is the maximum income tax rate applicable for an individual for the year of assessment 2015/2016? a. 16 % b. 28% c. 10% 2

3 d. 24 % 17) Mr Pilipahana is a Business Analyst of a company and is given a travelling allowance of Rs 80,000monthly for the whole year of assessment 2015/2016. Determine the false statement in terms of Mr Pilipahana s conveyance benefit. a. The value of benefit is Rs 960,000 b. The value of benefit exempted for tax purposes is only Rs 600,000 (Rs 50,000*12) c. The full benefit is exempted for tax purposes d. An amount of Rs 360,000 is liable for tax 18) The penalty that could be imposed by the Commissioner General for making an incorrect return is, a. A sum not exceeding Rs.50,000/-. b. A sum not exceeding in aggregation of Rs.2,000/- and twice the tax on the excess. c. 10% from the tax on assessable income as per the assessment. d. A sum not exceeding Rs.20,000/-. 19) Which of the following is not a circumstance that a tax payer is entitled to refunds of tax paid in excess? a. Any excess deduction made by an employer under the PAYE scheme. b. Any loss arising from on cessation of a trade, business, profession or vocation. c. Any excess on revising an assessment involving irrecoverable interest. d. The withholding tax deducted on interest is available, but there is no taxable income 20) Not an instruments on which stamp duty is payable to the government as per Stamp Duty Act No. 12 of 2006: a. an affidavit b. a policy of insurance c. bill of lading d. promissory note 3

4 (2 marks * Marks) Part II Question No. 02 (20 Marks) Upali Bakers Pvt Limited (UBL) is a well-known cake and flour product manufacturer in Sri Lanka which was incorporated in 2001 as a subsidiary of Sirisanda PLC (S PLC). Over the last fifteen years UBL recorded and impressive growth in terms of revenue and become one of the most renowned cake brands in Sri Lanka. You are the newly appointed tax consultant to UBL and had a meeting with Mr Thenuwara, the finance manager of UBL recently. After going through the drafted financial statements you have gathered the following details. a. Following figures have been extracted from the income statement for the year ended 31 st March Rs '000 Revenue 234,680 Other income - Dividend income - net Fixed deposit interest - net Profit from sale of van 490 Administrative and Distribution expenses 78,903 Finance cost 7,767 Profit before tax 34,783 b. Administrative and Distribution expenses include the following expenses as per Mr Thenuwara. - Being the holding company S PLC does all the management activities of UBL and charges a management fee monthly basis. Subsequent to an application made to the Commissioner General of Inland Revenue, he agreed to allow only 75% of the management fee to be deducted from the business profit under the provisions of the Inland Revenue Act. Total management fee paid within the year was Rs 3,600,000 - The contribution paid to the Employee Provided Fund and Employee Trust Fund by UBL within the year was Rs 8,400,000. Total salaries and wages for the year of assessment was Rs 30,000,000 - In March 2016, UBL donated Rs 1,500,000 worth food products to the flood victims. 4

5 - Entertainment expenses were Rs 250,000 - As the first step to reach the international market, UBL conducted a promotion campaign in few selected foreign countries to promote their brand Sirisanda incurring Rs. 10,000,000 within the year. The campaign was so successful so that they have had attractive responses from dealers of those countries. In addition, company has incurred an advertising expense of 1,240,000 within the year. c. During last couple of years, UBL has undertaken few major expansion projects with the funds borrowed from the holding company S PLC. Total dues to S PLC by 31 st Marc 2016 was Rs 110,000,000. Loan interest paid by UBL within the year was Rs 5,500,000 which is included in the finance cost. As at 31 March 2016, stated capital and total reserves of the company were Rs. 10,000,000 and Rs. 3,250,000 respectively. The balance finance cost includes the loan interest paid to the bank d. Details of the property plant and equipment are as follows. Rs '000 Opening balance as at 1 April 2015 (at cost) 345,675 Add: Additions 45,000 Less: Disposals (4,500) Closing balance as at 31 March 2016 (at cost) 386,175 - Additions includes the new building constructed Rs 43,000,000 and machinery purchased Rs 2,000, Only fixed asset disposal recorded within the year is the disposal of delivery van for a proceed of Rs 2,500,000, which was purchased in 28 th November The gain on disposal is included in the other income. - Capital allowances have already been granted for all assets other than the additions during the year. Accounting depreciation charged to the profit and loss for the year is Rs 24,000,000. e. All other expenses are allowed for tax purposes 5

6 Required Based on the above information, you are required to calculate adjusted taxable business profit of UBL for the year of assessment 2015/2016 Question No. 03 (20 Marks) (Total 20 Marks) i. Mr. Shalitha is the proprietor of SK Traders which is engaged in the business of mobile phone importing. He has paid NBT at the point of customs, but not paid any NBT on the sale. He received a letter of intimation from the Inland Revenue Department informing that an assessment will be issued on NBT on the turnover of phone sales. His understanding was that he has already paid NBT at the point of import and no more NBT is payable by himself. What is your opinion on such NBT liability within the meaning of the statutory provisions of the Nation Building Act No. 9 of 2009: Is he liable to pay NBT on the turnover of vehicle sales? (6 Marks) ii. Manjula Trading Ltd had a turnover of Rs.250 million for the quarter ended 31 st March 2016 and its income tax liability for the Y/A 2014/2015 was Rs.120, 000. Does Manjula Trading Ltd need to pay ESC for the quarter ended 31 st March Explain with reasons. (4 Marks) iii. What is the time of supply in the following situations? a. Services were performed on and the invoice was issued on b. Services were performed on and the invoice was issued on c. One fourth of the bill was received as an advance on and the services were performed on The final payment was received on (4 Marks) 6

7 iv. ABC Ltd, a VAT registered supplier, has provided following information for the quarter ending 31 st March Rs. 000 Revenue (Including VAT) 22,200 Revenue (on Exempt Items) 10,000 Purchases (Including VAT) 19,980* *(Purchases utilized to generate all the revenue) Calculate the VAT liability of ABC Ltd for the Quarter (6 Marks) (Total 20 Marks) End of Part II 7