Question 1 Essentials Holdings Pte Ltd (EHPL) is a company incorporated and tax resident in Singapore. It has two wholly-owned subsidiaries, namely (i) Essentials Trading (Singapore) Pte Ltd (ETSPL) which is a company incorporated and tax resident in Singapore and (ii) Essentials Trading (Malaysia) Sdn Bhd (ETMSB), which is a company incorporated and tax resident in Malaysia. All companies have December as their financial year end. On the basis of the Board of Directors recommendation, your team has been engaged as the Groups external tax consultants and your primary role is to conduct a thorough examination of the Groups business transactions with a view to identifying potential areas of tax saving opportunities for the Group. Your team has noted the following during the course of your review of certain business transactions of the Group: 1. There is a need for ETSPL to enhance its productivity and competitiveness in the next few years. Hence, ETSPL plans to invest an amount of $60,000 to upgrade all the existing tablets and communication devices for the entire sales team in the financial year ending 31 December 2018. 2. ETSPL also plans to launch two new product lines within the next two years. It proposes to invest an additional amount of $2,000,000 to conduct substantive research and development of certain new products in its R&D place in Singapore in the financial year ending 31 December 2018. 3. ETSPL plans to hire an additional headcount of 100 to join its sales team. ETSPL is fully aware that it can be a challenge to recruit top sales professionals. Thus, it plans to offer an attractive remuneration package to newly recruited sales professionals which will include the following: If the sales professionals use their own cars to meet prospects and clients, full reimbursement of their car running expenses can be claimed from ETSPL. A Rolex watch will be gifted to a sales professional when he exceeds his sales target at the end of the financial year (it is estimated that a Rolex watch will cost ETSPL $10,000). Incentivised trip to Bali when the entire sales team exceed their team target at the end of the financial year. 4. ETSPL plans to be more active in conducting feasibility studies with a view to identifying a few new markets in South East Asia and Europe as part of its new product launches. It is estimated that this project will cost ETSPL $160,000 each year for the next two years. 1. As at 31 December 2017, ETSPL had estimated the following tax losses and capital allowances (subject to the finalisation of the income tax computation for YA 2018) $ Tax losses for YA 2018 150,000 Capital allowances for YA 2018 50,000 Unabsorbed capital allowances for YA 2016 30,000 ETSPL was in a tax paying position in YA 2017 and its chargeable income for YA 2017 before partial tax exemption was $500,000. 2. As at 31 December 2017, EHPL had a chargeable income before partial tax exemption of $30,000. 7. ETMSB plans to pay a dividend to EHPL amounting to $100,000 out of its corporate profits. Based on your research, the current Malaysian corporate income tax rate is 24% and any dividends paid to non-resident shareholder are not liable to any Malaysian withholding tax. You have also confirmed with the Tax Director of ETMSB that the profits out of which the above proposed dividend will be paid would be subject to Malaysian corporate income tax. 8. ETSPL plans to raise more capital to finance its business expansion in Asia. Of course, there are two normal ways in which capital can be raised. The first one is to obtain news loans from Singapore banks to finance its working capital requirement. The other means would be to seek equity investment from its shareholders. Currently, ETSPL deploys debt financing as the means to finance its working capital and incurs interest on the loans from a Singapore bank. 9. EHPL plans to invest in the equity interest of two operating companies - one in Singapore and another in Taiwan. Currently, EHPL does not own any shares in these two companies but when the green light for the proposed acquisition is given by the Board of Directors, these two companies will be the wholly-owned subsidiaries of EHPL. 10. EHPL has owned an investment property in Singapore for more than 15 years. It has come to the time where the Board of Directors is planning to dispose of this property in view of the booming property market condition. Furthermore, the reason why the Board is keen to execute this plan is that they have received several attractive offer from several potential buyers. Required: Analyse these ten points and advise the Group generally how to achieve income tax saving and explain any tax planning opportunities available to the Group from a Singapore income tax perspective, taking into consideration the latest income tax changes as announced by the Minister for Finance in Budget 2018 on 19 February 2018. You are required to present the answer using the tabular format below (and marks will be deducted for failure to comply with this requirement). You are not required to prepare any income tax computations for the Group.

Nature of Business Transactions	Tax Saving Opportunities
1 Proposed upgrade all the tablets and communication devices by ETSPL

2 Proposed additional R&D activities in Singapore by ETSPL
3 Proposed recruitment of additional 100 top sales professionals by ETSPL
4 Proposed feasibility study trip by ETSPL
5 Tax losses and CA for YA 2018 and unabsorbed CA for YA 2016 for ETSPL
6 Comment on EHPLs income tax position for YA 2018
7 Proposed dividend from ETMSB to EHPL
8 Raising capital through debt financing versus equity financing by ETSPL
9 Potential investment in two new wholly-owned subsidiaries by EHPL
10 Potential divestment of an investment property by EHPL

(50 marks)