Taxation - How to determine the 50% rule?

Working Example:

Income and Expenditure Account of MCST ABC

Expenses:
$
Revenue:
$
Cleaning expenses
80,000
Maintenance fund contribution
2,000,000
Adminstrative expenses
150,000
License fees
130,000
Utilities
1,500,000
Rental of concourse
35,000
Repair & Maintenance
200,000
Gross car park income
800,000
Management Fees
500,000
Interest income
6,000
Security contract expenses
200,000
  2,630,000    
       
Net Surplus
341,000
    
 
 
  2,971,000   2,971,000

In order to determine if the MCST ABC satisfies the 50% requirement, we need to make a comparison of receipts between members and non-members.

Comparison of Receipts from Members and Non-Members

Receipts Members Non-Members
 
$
$
Maintenance fund contribution
2,000,000
-
Licence Fees
-
130,000
Rental of concourse
-
35,000
Gross car park income
-
800,000
Interest income
-
6,000
     
 
2,000,000
971,000
Percentage
67.32%
32.68%

As more than 50% of the receipts are from members, the MCST is not deemed to be carrying on a business. However, it will be taxed on the other sources of income derived from dealings with non-members. Thus, tax is payable on the following income: -

  $
License fees 130,000
Rental of concourse 35,000
Interest income 6,000
  171,000

Please refer to IRAS website for details about tax rates and computation:


Updated January 2006