Fundamentals Level Skills Module, Paper F6 (CYP) Capital (net worth) statement 1 January 31 December

Transcription

1 Answers

2 Fundamentals Level Skills Module, Paper F6 (CYP) Taxation (Cyprus) Mr Ourin December 00 Answers and Marking Scheme Marks (a) (b) Capital (net worth) statement January 3 December Assets Immovable property (note ) Investments (note ) Business equipment (note 3) Motor vehicles (note 4) Total assets Liabilities Credit balance on new car (note 4) 0 (45.000) Net assets Less: net assets January 004 ( ) Capital increase for the period Add: Special defence contribution on rental income (note ) x 75% x 3% 3.40 Agent and transfer fees (note ) Loss from sale of old car (note 4) Living expenses (note 5) Social insurance and cohesion fund contribution (note 5) Income taxes (note 5) Residential house rent (note 5) 6 x x Total assets and expenses Deduct Business income (note 5) ( ) Rental Income (note ) 6 x x.000 (44.000) Profit from sale of shares (note ) see working (.500) Undeclared income for the period Working: Profit from sale of shares Disposal proceeds (500 shares x 5 each).500 Disposal proceeds (( sold Rights bonus) =.500 shares x 0 each) Cost (.000 shares x 5 each) + (500 rights x 0 each) (0.000) Profit from sale of shares According to the Assessment and Collection of Taxes Law 4/78 [s.30()], as amended, Mr Ourin, as a person deriving business income from the sources specified, must: For the years issue invoices and receipts relating to his transactions and collections. For the year 009 since his business income exceeds the amount of : maintain books and records on the basis of which accounts are prepared in accordance with acceptable accounting standards, and 5 which are audited according to acceptable standards by a person who has a licence to act as an auditor of a company according to company law

3 (c) (d) Marks Mr Ourin is making taxable supplies of services and as such has an obligation to register for value added tax (VAT) if: at the end of any month the value of such supplies for the months then ended exceeds the VAT annual registration limit of 5,600; or if at any time there are reasonable grounds to believe that the value of taxable supplies in the next 30-day period will exceed the annual registration limit of 5,600. Registration is effective from the end of the month following the month in which the registration limit was exceeded or from the beginning of the 30 day period respectively. 3 A self-employed person is liable to pay social insurance contributions for each week in which he has worked as a self-employed person. Self-employed people pay their contributions quarterly, in arrears, within one month and ten days from the end of each quarter. People wishing to pay monthly are allowed to do so Akropolis Ltd (a) (i) Profits subject to corporation tax for the year 009 Gross profit attributable to the Cyprus operations ( ) Recapture of 008 branch loss Less: Distribution and administration expenses attributable to Cyprus operations (working ) (57.000) Distribution and administration expenses attributable to the branch operations 0 Right A attributable to the Cyprus operations (working ) (6.000) Right B attributable to the Cyprus operations (working ) (4.000) Right C attributable to the branch operations 0 Balancing allowance (working 3) (0.000) Profit subject to corporation tax Tutorial note: Akropolis Ltd is subject to corporation tax only on its profits derived from the Cyprus operations. The profits from the Athens branch operations are exempt from Cyprus tax. Workings:. Distribution and administration expenses re Cyprus operations (accrual basis) Carried Paid Brought Profit and forward forward loss account Cyprus (5.000) Software expenses re Cyprus operations (accrual basis) Carried Paid Brought Profit and forward forward loss account Right A (3.000) Right B (3.000) Balancing statement on sale of fixtures and fittings Cost at January Capital allowances at 0% for three years (006, 007 and 008) (.000) Sales proceeds (8.000) Balancing allowance

4 Marks (ii) Profits subject to capital gains tax for the year 009 Plot of land bought on January 009 Sale proceeds Less: Indexed cost ( x 95/07 76) (786.) Commission to a non-licensed agent 0 Land transfer fees (5.000) Profit subject to capital gains tax (b) Group relief available for the year 008 Alfa Ltd may surrender the losses of to Akropolis Ltd since Akropolis Ltd held 75% of its shares for the whole year. Beta Ltd may not surrender any losses to Akropolis Ltd because Akropolis Ltd does not hold directly or indirectly 75% or more of its shares. Gama Ltd may not surrender any losses to Akropolis Ltd because: () Akropolis Ltd does not hold directly or indirectly 75% or more of the shares in Gama Ltd; and () the shares in Gama Ltd were held by Beta Ltd and Alfa Ltd for less than the whole year. 5 Group relief available for the year 009 Alfa Ltd may surrender its losses of to Akropolis Ltd because, as in 008, Akropolis Ltd held 75% of its shares for the whole year. Beta Ltd may surrender its losses of to Akropolis Ltd because following Alpha Ltd s acquisition of the remaining 5% of its shares, Akropolis Ltd indirectly holds 75% of its shares for the whole of the year Gama Ltd may surrender its losses of to Akropolis Ltd because following Alpha Ltd s acquisition of the remaining shares in it and Beta Ltd, Akropolis Ltd indirectly holds 75% of its shares for the whole of the year Kerkez Ltd (a) Capital gains tax liability for the year 009 Sale of office premises Sale proceeds Less: Indexed cost ( x 95/78 3) (578.67) Commission to lawyer not allowed 0 Land transfer fees (.000) Capital gain Working: Cost excluding land ( x 75%) Capital allowances for years 996 to x 3 years x 3% = Balancing statement Premises proceeds ( x 75%) Cost of premises ( x 75%) ( ) Wear and tear claimed (7.000) Balancing addition Since there is a balancing addition, the capital allowances are not added back. 5

5 Marks Sale of plot of land Sale proceeds Less: Indexed cost ( x 95/79 7) (84.975) Commission to a licensed agent (3% x ) (4.000) Land transfer fees (4.000) Capital gain Sale of shares in Bank of Cyprus (not subject to CGT) 0 Total subject to capital gains tax (profit from sale of office premises plus profit from sale of land) Capital gains tax liability at 0% (b) (i) A declaration of disposal of property should be submitted in respect of a chargeable disposal within one month from the date of the disposal. (ii) Where no declaration is submitted the Director may issue a best judgement assessment on the basis of the information available to him at that time. Where the Director is of the opinion that the taxpayer s self-assessment declaration is less than a proper assessment he may within three months of its submission issue a supplementary assessment. 4 (iii) The capital gains tax payable is due: When the taxpayer makes a self-assessment declaration at the same time as filing the declaration, within one month of the date of the disposal. When the Director raises a direct assessment (best judgement or supplementary), not later than the end of the month in which the assessment is raised. (iv) Where under the terms of the sales agreement the consideration is paid by instalments, the capital gains tax due can also be paid by instalments, but with interest from one month from the date of disposal to the date of payment of the instalment in each case. 0 4 (a) (i) Where a customer fails to pay due to bankruptcy or other reasons, then the supplier may claim bad debt relief provided all four of the following conditions are met: a supply of goods and services has been made for consideration in money or by barter; output VAT has been accounted for and paid over by the supplier; the whole or part of the debt has been written off as bad in the supplier s books; and at least months has elapsed from the time that payment was due. Claims for bad debt relief are subject to a four year time limit. 4 (ii) A taxable person must account for output VAT charged to a customer, irrespective of whether the debt has been paid. On a claim being made by the supplier, bad debt relief is given for the VAT chargeable on the outstanding amount less any amount subsequently received in respect of the bad debt. If there has been a series of supplies, any payments made by the customer must be allocated on a FIFO basis unless the customer has allocated a specific payment to a particular supply and paid for that supply in full. Relief is given by including the recoverable amount in the total of input VAT on the VAT return for the period of the claim. Following a bad debt relief claim, the customer is required to repay the VAT that he has claimed on the supplies for which he has not paid to the VAT Commissioner. 6

6 Marks The supplier must notify the customer that bad debt relief is being claimed, and this notification serves as an instruction to the customer to repay the input VAT. Notification must be made within seven days of the bad debt claim. The supplier must keep all necessary documents to support the claim. 5 (b) (c) VAT bad debt relief claimable by Mr Nikos The payment of is deemed to cover the following supplies (FIFO basis): VAT VAT inclusive Supply on 3 March Supply on 30 April Supply on 8 May 009 (see working) Working: VAT applicable.450/4.600 x 600 = 30 Total VAT accounted for 750 Total VAT deemed paid (470) Total bad debt relief in respect of unpaid part supply of.50 on 8 May A VAT invoice need not be issued where: the supply is zero rated; input tax is not deductible; the supply is for no consideration (even if VAT is chargeable); the supply falls under the profit margin scheme; the customer is not a taxable person; in the case of a retailer s invoice, the customer does not request one. Any FOUR items at marks each maximum 5 7

7 5 Fernandez Ltd Marks Corporation tax payable for the year 008 Taxable income Tax losses from 007 (50.000) Corporation tax at 0% Provisional tax paid (5.000) Additional tax 0% of (provisional tax payment less than 75% of the amount due) Self-assessment tax paid (5.000) Tax payable by self-assessment on 3 July Additional tax of 5% of (tax unpaid at 3 January 00) Interest at 8% on for six months (completed months only) 3.67 Total amount due as at 8 February Penalty for late submission of tax return 5 Total including all penalties and interest