Paper F6 (MYS)

Fundamentals Level – Skills Module

Taxation
(Malaysia)
Monday 7 December 2009

Time allowed
Reading and planning: 15 minutes
Writing: 3 hours

ALL FIVE questions are compulsory and MUST be attempted.

Tax rates and allowances are on pages 2–4.

Do NOT open this paper until instructed by the supervisor.

During reading and planning time only the question paper may
be annotated. You must NOT write in your answer booklet until
instructed by the supervisor.
This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

SUPPLEMENTARY INSTRUCTIONS
1. Calculations and workings should be made to the nearest RM.
2. All apportionments should be made to the nearest whole month.
3. All workings should be shown.

TAX RATES AND ALLOWANCES

The following tax rates, allowances and values are to be used in answering the questions.

Income tax rates

Resident individual
Chargeable income Tax payable
Band Cumulative Rate Cumulative
RM RM % RM
2,500 2,500 0 0
2,500 5,000 1 25
15,000 20,000 3 475
15,000 35,000 7 1,525
15,000 50,000 12 3,325
20,000 70,000 19 7,125
30,000 100,000 24 14,325
Exceeding 100,000 27
Resident company
Paid up ordinary share capital First Excess over
RM500,000 RM500,000
RM2,500,000 or less 20% 25%
More than RM2,500,000 25% 25%
Non-resident
Company 25%
Individual 27%

2
 Personal deductions
RM
Self 8,000
Self – additional if disabled 6,000
Spouse 3,000
Spouse – additional if disabled 3,500
Child – basic rate 1,000
Child – higher rate 4,000
Disabled child 5,000
Life insurance premiums and approved scheme contributions maximum 6,000
Medical expenses for parents maximum 5,000
Medical expenses for serious disease of self, spouse or child, including
up to RM500 for medical examination maximum 5,000
Basic supporting equipment for self, spouse, child or parent if disabled maximum 5,000
Educational and medical insurance for self, spouse or child maximum 3,000
Study course fees for skills or qualifications maximum 5,000
Purchase of a personal computer maximum 3,000
Purchase of books, magazines etc for personal use maximum 1,000
Purchase of sports equipment maximum 300
Deposit for a child into the National Education Savings Scheme maximum 3,000

Rebates
Individual with chargeable income not exceeding RM35,000 RM
Basic rate 400
Rate for an individual entitled to a deduction for a spouse or a former wife 800

Value of benefits in kind

Car scale
Cost of car Prescribed annual value of
(when new) private usage of car
RM RM
Up to 50,000 1,200
50,001 to 75,000 2,400
75,001 to 100,000 3,600
100,001 to 150,000 5,000
150,001 to 200,000 7,000
200,001 to 250,000 9,000
250,001 to 350,000 15,000
350,001 to 500,000 21,250
500,001 and above 25,000
The value of the car benefit equal to half the prescribed annual value (above) is taken if the car provided is more than
five (5) years old.
House furnishings, apparatus and appliances RM per month
Semi-furnished with furniture in the lounge,
dining room, or bedroom 70
Semi-furnished with furniture as above plus air-conditioners,
and/or curtains and carpets 140
Fully furnished premises 280

3 [P.T.O.
Other benefits RM per month
Domestic help 400
Gardener 300
Driver 600

Capital allowances
Initial Annual
allowance allowance
% %
Industrial buildings 10 3
Plant and machinery – general 20 14
Motor vehicles, heavy machinery 20 20
Office equipment, furniture and fittings 20 10

Sales tax and service tax

Rate %
Sales tax 10
Service tax 5

4
ALL FIVE questions are compulsory and MUST be attempted

1 (a) The partnership firm of May, Teng and Yusof closes its annual accounts on 31 December. Yusof ceased to be a
partner on 30 June 2009. Jane joined the partnership on 1 July 2009. The partnership agreement provides for
the profits for the year 2009 to be shared as follows:
Salary Interest on capital
RM RM
May 30,000 5,700
Teng 36,000 Nil
Yusof Nil 2,400
Jane 18,000 2,000
––––––– –––––––
84,000 10,100
––––––– –––––––
Profit sharing ratio: May Teng Yusof Jane
1 January to 30 June 2009 2/4 1/4 1/4 –
1 July to 31 December 2009 1/3 1/3 – 1/3
The partnership’s profit before tax for the year ending 31 December 2009 is expected to amount to RM276,900
after taking into account the following:
RM RM
Rental income received from the
lessee of the partnership’s previous premises 18,000
Depreciation 33,100
Private expenses:
May: private use of car 3,000
Yusof: medical expenses 4,000
––––––
7,000
Partners’ salaries 84,000
Interest on capital 10,100
Approved donation paid on 2 May 2009 10,000
Approved donation paid on 3 July 2009 18,000
Unapproved donation paid on 6 October 2009 4,000
Capital allowances for the year of assessment 2009 are expected to amount to RM21,000.

Required:
(i) Compute the provisional adjusted income and divisible income of the partnership for the year of assessment
2009; (7 marks)
(ii) Based on the information given above, compute the total income of each of the four partners for the year
of assessment 2009.
Note: Marks will be awarded for the use of accurate technical terms to describe the figures comprising the
stages in the computation of divisible income and total income. (20 marks)

(b) State the factors that determine the existence of a partnership. (3 marks)

(30 marks)

5 [P.T.O.
2 Tipware Sdn Bhd is engaged in the manufacture of tyres. The company’s profit and loss account for the year ended
30 September 2009 shows the following:
Note RM’000 RM’000
Sales 1 32,306
Cost of sales 2 (21,440)
–––––––
Gross profit 10,866
Less:
Salaries, wages and EPF 3 3,952
Legal expenses 4 14
Repairs and maintenance 5 32
Depreciation 988
Annual general meeting expenses 6 19
Practical training 7 44
Donations 8 600
Insurance proceeds 9 (625)
Export credit insurance premiums 10 17
Library facilities 11 110
Penalty for late submission of tax return 15
Hire purchase interest 12 2
––––––
(5,168)
–––––––
Profit before taxation 5,698
–––––––
Notes:
1 Sales include an unrealised gain from foreign exchange in respect of the sale of tyres amounting to RM40,000.
2 Cost of sales includes the following costs in respect of warranty claims for faulty tyres:
RM
A provision in respect of claims not yet settled 27,000
A payment to settle a claim 8,000
3 Salaries, wages and EPF (Employees Provident Fund) includes the sum of RM220,000 paid to a manager to
secure his early retirement on account of misconduct.
4 Legal expenses comprise:
RM
Legal cost on trading goods lost in transit 6,000
Legal expenses to obtain a trading licence 8,000
–––––––
14,000
–––––––
5 Repairs and maintenance consists of an extension to the company’s existing factory amounting to RM32,000.
6 Annual general meeting (AGM) expenses were in respect of postage for notices of the general meeting and the cost
of printing the directors’ report and accounts.
7 Practical training in relation to the business of Tipware Sdn Bhd was given to non-employees who are resident in
Malaysia.

6
8 The following donations were made:
RM
To an approved institution 530,000
Of sports equipment for an activity approved by the Minister 16,000
To a project of national interest approved by the Minister 48,000
In cash (ang pow) handed to inmates of an old folks
home approved by the Minister 6,000
––––––––
600,000
––––––––
9 The insurance proceeds were paid to Tipware Sdn Bhd under a whole life policy on the accidental death of the
company’s chief executive officer.
10 The export credit insurance is provided by a company approved by the Minister of Finance.
11 The sum of RM110,000 was incurred in providing library facilities which are accessible to the public.
12 Tipware Sdn Bhd bought information and communication technology (ICT) equipment under a hire purchase
agreement. The equipment cost RM80,000. In December 2008 the company paid a deposit of RM20,000 as
well as the first of 20 monthly instalments of RM3,200 (inclusive of monthly interest of RM200). The equipment
qualifies for accelerated capital allowances (i.e. an initial allowance of 20% and an annual allowance of 80%).
Other information:
For the year of assessment 2009 capital allowances in respect of assets other than those referred to in note (12) above,
are expected to amount to RM845,000.

Required:
(a) Compute the total income of Tipware Sdn Bhd for the year of assessment 2009.
Notes:
(1) Your computation should start with the profit before taxation figure and follow the descriptions used in the
notes to the profit and loss account, indicating ‘nil’ in the appropriate column for any item that does not
require adjustment.
(2) Marks will be awarded for the use of accurate technical terms to describe the figures comprising the stages
in the computation of total income. (15 marks)

(b) Explain the tax treatment of the items stated below:

(i) payment to manager (note 3); (1 mark)
(ii) practical training (note 7); (2 marks)
(iii) cash (ang pow) handed to old folks home inmates (note 8); (1 mark)
(iv) insurance proceeds (note 9); (1 mark)
(v) export credit insurance premiums (note 10); (1 mark)
(vi) library facilities (note 11); and (1 mark)
(vii) penalty for the late submission of a tax return. (1 mark)

(c) State the special conditions that determine whether the information and communication technology (ICT)
equipment mentioned in note 12 qualifies for accelerated capital allowances or not. (2 marks)

(25 marks)

7 [P.T.O.
3 (a) (i) Encik Kumar intends to make an election that his total income be aggregated with the total income of his wife,
Puan Rani, for the year of assessment 2009. The joint assessment is expected to show the following:
RM
Total income of Puan Rani 60,000
Total income of Encik Kumar 20,000
Tax charged 6,745

Required:
State the formula for determining the amount of tax that can be collected from a husband who elects for
joint assessment, and compute the tax collectible from Encik Kumar. (3 marks)
(ii) State the circumstances whereby a husband can elect for joint assessment with a wife as provided under
the Income Tax Act, 1967. (4 marks)

(b) Jusin Sdn Bhd, a trader in hardware, permanently ceased operations on 30 June 2009. The company sold all its
remaining stock-in-trade to Boonpin Sdn Bhd on 8 July 2009 for RM190,000. The purchased stock-in-trade was
used by Boonpin Sdn Bhd for its hardware business.

Required:
State, with explanations, the value of stock-in-trade for tax purposes that must be shown in Jusin Sdn Bhd’s
accounts as at 30 June 2009. (4 marks)

(c) Explain briefly the concept of tax planning, in particular, the difference between tax avoidance and tax
evasion. (4 marks)

(d) State the circumstances under which an individual may be deemed to be a resident of Malaysia for a basis
year by virtue of the fact that he is a Malaysian citizen. (3 marks)

(e) Encik Ananda whose income is assessed in the name of his wife, Puan Soosi, purchased a wheelchair costing
RM1,300 for his mother, a disabled person and incurred RM400 on his mother’s medical expenses.

Required:
State, with explanations, whether personal reliefs are available for the year of assessment 2009 in respect of
the above expenditure by Encik Ananda, and if so, to whom they will be given. (2 marks)

(20 marks)

8
4 (a) Hosin Sdn Bhd, a manufacturer of floor tiles having a paid up ordinary capital of RM3 million, recorded the
following in respect of its financial year ended 30 September 2009:
(i) The sum of RM10,800 incurred in February 2009 on small value assets each costing not more than
RM1,000. Included in the list of assets is the cost of a fax machine amounting to RM800.
(ii) A general machine was completely destroyed in March 2009. The company received insurance moneys
amounting to RM39,000. The market value of the machine at the time of its destruction was RM44,000.
The residual expenditure as at 30 September 2008 was RM22,800 and the total capital allowances previously
claimed by the company amounted to RM20,400.

Required:
Compute the capital allowances and balancing charge, if any, for the year of assessment 2009 in respect of
the above assets, assuming that Hosin Sdn Bhd claimed the normal and not the accelerated allowances on the
fax machine and the special allowance under paragraph 19A, Schedule 3, Income Tax Act 1967 in the case
of the other small value assets. (6 marks)

(b) Nin Sdn Bhd, with a financial year ending 30 June, has been operating licensed nursing homes for several years.
The company incurred the following expenditure during the financial year ended 30 June 2009:
(i) Building A
A building comprising a nursing home and an office was constructed in January 2009. The cost of constructing
the nursing home amounted to RM183,000 and the cost of constructing the office amounted to RM17,000.
The building has been in use since April 2009.
(ii) Building B
Nin Sdn Bhd rented a building for RM20,000 per month and incurred the sum of RM300,000 on renovating
the building in September 2008. The building has been in use as a nursing home since November 2008. It
has been agreed that 15% of the building is used as an office.

Required:
Compute the industrial building allowances claimable in respect of the two buildings for the year of assessment
2009. (6 marks)

(c) State, with reasons, whether the following expenses are deductible as the provision of entertainment in
determining the adjusted income of Lim Enterprise Sdn Bhd:
(i) a sum of RM1,000 spent on a birthday gift for a supplier;
(ii) the purchase of hampers for customers on Chinese New Year, amounting to RM12,000; and
(iii) the sum of RM15,000 incurred to provide entertainment to promote the company’s business on the
occasion of a golf tournament which was open to members of the public. (3 marks)

(15 marks)

9 [P.T.O.
5 (a) State the circumstances for exemption from the licensing and payment of sales tax in respect of:
(i) a manufacturer of taxable goods; and
(ii) a contract manufacturer. (4 marks)

(b) K Security Sdn Bhd, a taxable person for service tax purposes, issued the following invoices:
(i) Invoice A, issued on 12 March 2009. The invoice amount was collected on 9 August 2009.
(ii) Invoice B, issued on 6 July 2008. The invoice amount was not collected until 2 November 2009.

Required:
For each of the invoices, state the taxable period and the deadline for remitting the service tax to the Customs
Department. (3 marks)

(c) Sun Employment Agency Sdn Bhd issued an invoice on 25 May 2009 for RM21,000 inclusive of service tax of
RM1,000. Payment of the invoice was collected on 9 June 2009. Sun Employment Agency Sdn Bhd remitted the
service tax to the Customs Department on 17 September 2009.

Required:
Compute the total amount of service tax and penalties payable by Sun Employment Agency Sdn Bhd in
respect of the above invoice. (3 marks)

(10 marks)

End of Question Paper

10