Question 1 Xander Pharmaceutical Singapore Pte Ltd (XPS), a Singapore incorporated company, is in the business of manufacturing medical and laboratory consumables. It was incorporated on 15 December 2018 and its first set of accounts was for the period ended 31 July 2019. It is a wholly owned subsidiary of Xander Pharmaceutical Inc. (XPI), a company tax resident in Country X, until 15 January 2020 when XPI transferred 20% of its shareholdings to F K Quek to complete the buyout of Mr Quek's medical device manufacturing business (Quek's business) in Singapore. Mr Quek was appointed the managing director of XPS and the company holds its directors' meetings in Singapore. For the financial year ended 31 July 2020, the company made a net profit before tax of $1,180,000 on turnover of $15,000,000. The profit was arrived at after taking into consideration the following income and expenses: Income: Rental income from renting out excess space at its Singapore factory premises. The factory premises are under-utilized since acquisition and as such, the under-utilized space was rented out from 1 October 2019. Interest accrued on a 6-month fixed deposit maturing on 30 September 2020. The fixed deposit was placed with DBS Bank, an approved bank in Singapore. Interest charged on late payment by customers. Dividend income from shares held in T-Mo Pharmaceutical Ltd ("TMP"), a company tax resident in Country Y which has a headline tax rate of 10%. Country Y does not impose dividend withholding tax. The proceeds from the dividend, paid out of after-tax profits in Country Y, were used to settle an overseas supplier's invoice for manufacturing supplies on 25 July 2020. The goods were received in Singapore only on 2 August 2020. XPS is not entitled to relief for any foreign tax suffered on the dividend. Enterprise Development Grant from Enterprise Singapore to help defray the costs incurred on the registration of a patent for a medical equipment developed by staff of XPS. $ 100,000. 20,000 12,300 15,000 30,000 Job support scheme payout. 240,000 Expenses: Annual property tax and maintenance charges for factory premises. The total area of the factory premises is 10,000 square feet of which 2,000 square feet is rented out (see rental income above). 80,400 Depreciation 150,000 Legal and professional fees for: . Debt recovery from customers in respect of goods sold in financial year 2020, 3,000 Drafting of lease agreement with tenant, including stamp duty (see "Rental" under Income above) 8,480 Due diligence audit fee in relation to acquisition of Quek's business. 18,000 Annual manufacturing licence fee (statutory) 15,000